19 October 2006
ENGLISH ONLY
United Nations Conference on Trade and Development
An Assessment of Projects on the Clean Development
Mechanism (CDM) in India*
Prepared by
Joseph B. Gonsalves1
*The views expressed in this paper are those of the author and do not necessarily reflect the
views of the United Nations.
1
Consultant, United Nations Conference on Trade and Development, Geneva. The author wishes to thank
Mr. Lucas Assunção, Climate Change Programme and Biotrade Initiative, UNCTAD, for helpful discussions.
UNCTAD/DITC/TED/2006/5
Contents
Executive summary....................................................................................................................7
Overview of CDM market .........................................................................................................9
Analysis from India’s national strategic study..................................................................9
World Bank study of the carbon market .........................................................................11
CDM project locations worldwide .........................................................................12
Types of CDM projects worldwide........................................................................13
Structure of CDM transactions worldwide ............................................................14
GHG emissions in India...........................................................................................................14
Areas of potential CDM in India .............................................................................................19
CDM potential in India’s electric power sector ..............................................................20
Overview of India’s electric power industry .........................................................21
Better utilization of power generation technology.................................................23
Integrated Gasification Combined Cycle (IGCC).........................................24
Cogeneration and combined cycle ................................................................24
Supercritical thermal plants ..........................................................................24
Fluidized bed combustion .............................................................................24
Fuel switching in power generation ................................................................................25
CDM potential in renewal energy (RE) technology .......................................................25
Barriers in commercializing biomass energy projects ...........................................27
Financing from IREDA for renewable energy projects .........................................28
CDM projects in renewable energy .......................................................................28
Biomass (excluding bagasse) projects ..........................................................29
Bagasse projects ............................................................................................29
Hydroelectric projects ...................................................................................29
Wind projects ................................................................................................29
Manure projects ............................................................................................29
Biogas projects ..............................................................................................29
Gasification projects .....................................................................................30
Biodiesel projects ..........................................................................................30
Improved energy efficiency in industry ..........................................................................30
Iron and steel ..........................................................................................................30
Cement ...................................................................................................................31
Fertilizer .................................................................................................................31
Aluminium .............................................................................................................31
Pulp and paper........................................................................................................32
Thermal destruction of HFC-23 ......................................................................................32
Thermal destruction of N2O ............................................................................................33
GHG mitigation in the transport industry .......................................................................33
Power generation from municipal solid waste (MSW)...................................................33
National CDM Authority .........................................................................................................34
Indian CDM National Authority’s approval criteria .......................................................35
Financing structures for CDM eligible projects.......................................................................37
Equity financing ..............................................................................................................37
Venture capital and special mutual funds .......................................................................37
Corporate finance ............................................................................................................38
Lending ...........................................................................................................................38
Merchant financing – Lease/equipment finance ............................................................38
3
Project finance ................................................................................................................38
Banking sector structure .................................................................................................39
Risks................................................................................................................................39
Issues and concerns related to project preparation and foreign participation..........................40
Projects approved by Indian CDM Authority..........................................................................41
Status of Indian CDM projects at the UNFCCC Executive Board..........................................45
Procedure for obtaining approval....................................................................................45
Baseline scenario ...................................................................................................46
Baseline approach ..................................................................................................46
Additionality ..........................................................................................................47
Validation...............................................................................................................49
Registration ............................................................................................................49
Verification ............................................................................................................49
Certification ...........................................................................................................49
Registered CDM projects................................................................................................49
GHG emission reduction by thermal oxidation of HFC-23 ...................................50
Biomass in Rajasthan: Electricity generation from mustard crop residue .............50
5 MW Dehar Grid-connected Small Hydroelectric Project (SHP) ........................51
CDM projects submitted for registration ........................................................................52
Clarion (12 MW) renewable sources biomass project ...........................................52
CDM projects under request for registration or review of registration ..........................53
Indian CDM methodologies approved by UNFCCC ......................................................53
Indian CDM methodologies under consideration by UNFCCC .....................................54
Indian CDM methodologies rejected by UNFCCC ........................................................56
Conclusions..............................................................................................................................59
References................................................................................................................................63
4
Tables
Table 1. Summary of projected demand for carbon reduction ...............................................10
Table 2. Estimates of total CDM demand (MTCO2eq) in 2010 ................................................10
Table 3. India’s initial national greenhouse gas inventories ...................................................15
Table 4. CO2 emissions from India in 1994.............................................................................17
Table 5. Project design documents funded by international donors in India...........................40
Table 6. CDM project-cycle related issues ..............................................................................41
Table 7. Projects approved by the National CDM Authority ..................................................42
Table 8. Indian CDM methodologies approved by UNFCCC ................................................53
Table 9. Indian CDM methodologies under consideration by UNFCCC ...............................54
Table 10. CDM methodologies rejected by UNFCCC ...........................................................56
Figures
Figure 1. CER traded, million tons CO2 equivalent.................................................................11
Figure 2. Buyers of CERs from January 2004 to April 2005 ..................................................11
Figure 3. CDM projects, by country ........................................................................................12
Figure 4. Types of CDM projects worldwide ..........................................................................13
Figure 5. Sectoral GHG emissions, 1994.................................................................................16
Figure 6. Contribution of various industries to GHG emissions in 1994 ................................18
Figure 7. GHG emissions from fuel combustion .....................................................................19
Figure 8. GHG mitigation potential in India in key sectors.....................................................20
Figure 9. GHG mitigation potential from power generation in India......................................20
Figure 10. Growth of India's electric power generation capacity ............................................21
Figure 11. Distribution of power generation, by sector ...........................................................22
Figure 12. Distribution of renewable energy projects, by sector.............................................28
Figure 13. GHG mitigation potential from industries..............................................................32
5
Executive summary
India is expected to capture between 20 and 30 per cent of the CDM market, bringing in up to
$300 million in revenue. Several favourable enabling factors have contributed to India’s preeminent position in the CDM market such as a good technical base and a pro-active National
CDM authority, which includes secretaries from ministries such as finance, non-conventional
energy sources and power. The Ministry of Environment and Forests is the nodal ministry
for CDM issues in India. Over the eighteen-month period from January 2004 to June 2005,
80 projects were approved by the National CDM Authority, far more than in any other
country during the same period.
The biggest sources of greenhouse gas emissions in India are the energy sector (61 per cent),
the agricultural sector (28 per cent) and industrial processes (8 per cent). Projects in
renewable energy, improved industrial efficiency and industrial processes, fuel switching and
municipal solid waste disposal offer the greatest potential for CDM.
The 44 CDM projects in renewable energy that have received host-country approval as of
June 2005 include projects based on biomass (bagasse, rice husk and cotton stalk) for
generating electricity, small hydroelectric plants, wind power, biogas, biodiesel and biomass
gasification. Improved energy efficiency projects (25) include waste heat recovery projects
in the iron and steel, cement, ammonia and pulp and paper industries, and other energy
efficiency projects such as installing more efficient pumps and metering devices in a
municipal water delivery system. The five fuel switching projects involve changing to a fuel
having a lower carbon-to-hydrogen ratio, such as from coal to oil or natural gas, or from oil
to natural gas, in power generating plants. Included in the five projects on improved
industrial processes are two on the thermal destruction of HFC-23, a greenhouse gas, and one
on the replacement of clinker in cement by non-cementitous material like fly-ash. The lone
municipal solid waste disposal project involves the anaerobic digestion of organically
degradable matter to produce methane, which serves as the fuel for the power plant.
In a CDM project, the buyer of the generated carbon emission reduction (typically a
government of an Annex I country or its agent) buys the certified emission reduction just like
the purchase of a commodity or service. The development of CDM projects in India is
largely consultant-driven and/or influenced by international donors’ capacity-building
initiatives in support of PDD (project design document) development. Financing for the
projects is available through banks and financial institutions and the Indian Renewable
Energy Development Agency.
The PDD is the key document required for the approval of a CDM, and there are several
hurdles in preparing the PDD. Firstly, the data for developing the baseline case might be
difficult to obtain. But frequently it is not easy to demonstrate the necessary additionality.
Additionality means proving that the proposed CDM project leads to a lower carbon emission
than the baseline case, that no official development funds would be used in the CDM project,
that there are feasible alternate technologies other than the one to be used in the CDM
project, and that the CDM project would not be financially viable without CDM revenue.
In conclusion, high quality CDM projects must be developed within the next two years for
India to capitalize on its CDM potential during the first commitment period, 2008-2012.
Implementation of the CDM in India can deliver significant local, economic and sustainable
7
development co-benefits. India’s CDM strategy, policy, and implementation plans should
include guidance on unresolved issues such as the sharing of CER revenue between project
proponents and utilities. Finally, cooperation with potential investors and stakeholders from
the public and private sectors should be encouraged to establish facilities for risk
management and project financing. This could take the form of a national CDM fund that
supports the development of good quality and highly relevant CDM projects.
8
Overview of CDM market
A review of the National Communications submitted by Annex 1 countries (EU15 + OECD)
reveals that the total annual carbon demand of the Annex 1 countries is in the range of 415–
1250 MTCO2eq (million tonnes of CO2 equivalent). This estimate takes into account the
emission trajectories of those countries and domestic action to reduce the emissions since
1990. Given the supply potential of "hot air" (the excess of the 1990 emission level over the
current level) in some countries and JI ERU (joint implementation emission reduction units),
the global CDM market is expected to be between 38 and 264 MTCO2eq per year.
The GHG emission is reported in terms of million tonnes of CO2 equivalent since the main
GHGs — carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and
sulphur hexafluoride — have different global warming potentials (GWPs). Relative to
carbon dioxide, methane has a GWP of 21 and nitrous oxide a GWP of 310. The other GHGs
have much larger GWPs. Hence since a 1 million tonne emission of methane has the same
global warming effect as a 21 million tonne emission of carbon dioxide, it is considered to be
the same as a 21 MTCO2eq.
India faces a potential CDM market that has become smaller than the originally envisioned
size, primarily because of the rejection of the Kyoto Protocol by the United States, which is
the largest emitter of GHGs in the world, accounting for over a third of the CO2 emitted by
Annex 1 countries. The existence of huge amounts of "hot air", mainly from the Russian
Federation and Ukraine (and now possibly from Kazakhstan), and the rules concerning the
inclusion of sinks in the Marrakesh Accords have further reduced the CDM market.
Analysis from India’s national strategic study
Literature-based analysis and carbon emission reduction trade (CERT) models indicate that
India is likely to capture 10 per cent of the global carbon market during the first commitment
period of 2008–2012. However, data from the World Bank Study, indicating a range of 20–
30 per cent, are more realistic since they are based on project data. Thus India’s volume of
CER (carbon dioxide emission reduction) exports in 2010 may range between 7.5 MTCO2eq
and 79 MTCO2eq, bringing in revenue in the range of $30–300 million per year. To meet a
CER supply level of 15 MTCO2eq by 2010, a few large and several medium-to-small size
projects would have to be in operation by 2007.
9
Table 1. Summary of projected demand for carbon reduction (Carbon Emission
Reduction Trade Model and literature-based analysis)
Global carbon market
Global market carbon price range
Global CDM volume
Volume of Indian CER exports*
India’s CDM export revenue
India's share in CDM market
415–1250 MTCO2eq/year
1.3–6.1 $/TCO2eq
37.8–264 MTCO2eq
7.5–78 MTCO2eq
30–300 million$/year
20–30 per cent
* The global CDM market volume and market price, the volume of Indian CER exports, and India’s
export revenues and market share summarize the results of various CERT scenarios. The CER price
of the scenario with the highest Indian CER export is $4/TCO2eq only. Therefore, the resulting export
revenues are $30–300 million.
Source: National Strategic Study (2005).
CERT results consider potential CER volume and price, but not crucial enabling factors such
as institutional arrangements, project preparation and technical capacity, transaction costs,
risk profile of country/project, transaction types, contractual arrangements, or host country
CDM policies which determine the relative competitiveness of a host country. These factors
seem to make India quite attractive at present, particularly relative to China. India could
achieve CER exports closer to 20–25 MTCO2eq per year if it takes a proactive approach to
CDM and if prospects for an extension of the Kyoto regime beyond 2012 emerge in the
coming years. Currently, the emphasis is on contractual obligations for the first commitment
period only.
Table 2 shows that most of the CDM demand will be from the European Union and Japan.
Table 2. Estimates of total CDM demand (MTCO2eq) in 2010
Government demand
Criquii
Natsource
and
(2003)
Kitous
(2003)
Australia
and New
Zealand
Canada
European
Union 25
Japan
Norway
and
Switzerland
Total
demand
Industry demand
Criquii
Natsource
and
(2003)
Kitous
(2003)
12
Total demand
Criquii
Natsource
and
(2003)
Kitous
(2003)
23
35
12.0–81.8
74
22.4
20
34.4–104.2
94
53.9–462.8
113
45.0–173.7
111
98.9–636.5
224
17.7–217.6
26
34.8–92.4
34
52.5–310
60
16
83.6–762.2
241
10
102.2–288.5
Source: National Strategic Study (2005).
10
198
26
185.8–1050.7
439
The current early CDM market is a buyers’ market. Accordingly, prices reflect the buyers’
willingness to pay, the project type, the size and cost of transactions, the risks involved and
the modalities for sharing them between buyers and sellers, and the premium for sustainable
development contributions. When deals are transacted in the form of CER purchase
agreements, as opposed to investment deals, the investors see India as an important CER
supplier.
World Bank study of the carbon market
The World Bank Study for the International Emission Trading Association (IETA) indicates
that the project-based emissions traded are rapidly increasing, approaching 107 million tons
in 2004 (figure 1), a 38 per cent increase over the preceding year. The share of volume of
emission reductions purchased by various countries from January 2004 to April 2005 is
shown in figure 2, again confirming that most of the CDM demand is from the EU and Japan.
Figure 1. CER traded, million tons CO2 equivalent
120
100
CER
80
60
40
20
0
1999
2000
2001
2002
2003
2004
2005 (JanApr)
Year
Source: World Bank/IETA.
Figure 2. Buyers of CERs from January 2004 to April 2005
New Zealand
7%
Canada
5%
Australia
3%
Other EU
32%
USA
4%
Japan
21%
Gov.
Netherlands
16%
11
UK
12%
Source: World Bank/IETA.
CDM project locations worldwide
The largest seller of ERs is Asia (45 per cent from January 2004 to April 2005). Latin
America is second with 35 per cent of the volume supplied (figure 3). Projects in OECD
countries, which include both Joint Implementation projects in New Zealand and voluntary
activities in the United States, rank third with 14 per cent, while transition economies rank
fourth at 6 per cent. These aggregate figures, however, are strongly influenced by the
dynamics of HFC-23 destruction projects, which are few in number but very large in volume,
and for the moment all located in Asia. For instance, the CDM project on HFC-23 destruction
initiated by Gujarat Fluorochemicals Ltd. in Gujarat, India, involves the elimination of only
290 ton/year of HFC-23, but since the global warming potential of HFC-23 is 11,700, this
translates into an emission reduction of 3 million tons of CO2 equivalent. In fact, Latin
America is by far the largest supplier of ERs from projects other than HFC-23 destruction (46
per cent). Asia’s share of non-HFC-based ERs is stable (28 per cent from January 2004 to
April 2005, against 28 per cent from January 2003 to December 2004). This result might
come as a surprise to observers of the carbon market, considering the very large flow of
projects approved by the Indian DNA, which is reflected, inter alia, in many of the
methodologies submitted to the CDM Executive Board. Most of these projects, however, are
intended to be unilateral CDM (i.e. projects that are implemented without an Annex I
participant). As long as no credit is sold, unilateral CDM projects (60 to 70 at least in India)
are not included in IETA’s database of transactions, and thus not reflected in the above
figures.
Figure 3. CDM projects, by country (share of volume supplied), January 2004 – April
2005
OECD
14%
Rest of Latin
America
22%
Transistion
Economies
6%
Africa
0%
Brazil
13%
Rest of Asia
14%
India
31%
Source: World Bank/IETA.
Figure 3 also shows that Africa continues to be bypassed by the carbon market, with a very
small volume transacted from January 2004 to April 2005. The portfolio of projects currently
at validation stage (which is known because of public comments requirements) shows a very
limited presence of African countries besides South Africa and, to a lesser degree, North
African countries. This under-representation of Africa raises deep concerns about the overall
equity of the distribution of the CDM market, as the vast majority of African countries have
not been able to pick up even one deal. In fact, Uganda and South Africa are the only two
sub-Saharan countries where large-scale carbon transactions have been completed, although
12
transactions are currently being prepared in Nigeria, Ghana, Sierra Leone, Zambia and
elsewhere.
In IETA’s database, 35 developing countries or transition economies have hosted an emission
reduction project since 2001. Projects are being developed in other countries, but we take into
account here only signed contracts or projects at an advanced stage of negotiation. However,
the three largest suppliers (India, Brazil and Chile) account for 58 per cent of the total volume
delivered over that period; and the top five (which include Bulgaria and Romania) account
for nearly 70 per cent. As can be seen in figure 3, and unilateral CDM notwithstanding, India
is by far the single largest supplier of emission reductions. In terms of trends, the market
seems to be concentrating in large, middle-income countries. Most of the new volume is
going to India and Brazil. Emerging countries in the carbon market are China, where projects
are now being accepted by the DNA, and Mexico, which has also seen large volumes
transacted in the past 12 months. This concentration of CDM flows towards large, middleincome countries is consistent with the current direction of foreign direct investment.
Types of CDM projects worldwide
An analysis of CDM project types shows that HFC-23 destruction dominates, comprising
about a quarter of the ERs supplied from January 2004 to April 2005. But methane and N2O
capture from animal waste is now second, with 18 per cent of the volume supplied. Biomass
energy, hydro and landfill gas capture share third place, with about 10 per cent of the volume
supplied (figure 4). Projects abating non-CO2 gases (N2O, HFCs and methane) account for 57
per cent of the volume supplied, and even for more than two thirds of the total volume
supplied if biomass energy is added to this group. On the other hand, energy efficiency and
fuel switching (included in the “Other” category in figure 4) account for only about 4 per cent
of the total volume supplied. This is likely to continue in the foreseeable future, as projects
with emission reductions that can be generated quickly are developed to meet first
commitment period requirements.
Figure 4. Types of CDM projects worldwide
N2O
4%
Other
7%
Landfill Gas Capture
10%
Hydro
12%
HFC
25%
Wind
7%
Biomass
11%
Forestry
4%
Energy Efficiency
2%
Animal Waste
18%
Source: World Bank/IETA.
13
Structure of CDM transactions worldwide
Most project-based transactions to date (nearly all since January 2004) follow a commodity
model, whereby the buyer of carbon purchases the emission reductions generated by the
project as it would purchase any other commodity or service. Only a few transactions follow
an investment model, whereby the buyer invests either equity or debt in a project and gets the
emission reductions as part of its returns. This has important implications for the financial
structure of CDM projects. Indeed, carbon buyers under a commodity model tend to pay for
the carbon on delivery, thereby reducing their exposure to project risks. Although this future
cash flow adds to the internal rate of return, the projects often need upfront financing to
cover, inter alia, construction costs. Most carbon contracts thus do not directly address the
upfront financing barrier, but do so indirectly. Since carbon payments are payable in strong
currencies (typically, dollars, euros or yens) and originate from buyers with high credit
ratings, they can reduce risks, increase financiers’ confidence in the project and leverage
additional capital.
So far, there are few cases where upfront financing (or better terms for upfront financing) was
leveraged by a carbon contract. The relatively small size of the market and the underlying
uncertainties have up to now discouraged large financial institutions, leaving the market to
specialized entities such as mezzanine financiers. The simultaneous entry into force of the EU
Emission Trading Scheme (ETS) and of the Kyoto Protocol might provide additional
incentives for financial institutions to lend against carbon revenues. Some buyers increasingly
offer upfront financing as well. Even within the broad parameters defined above (commodity
purchase, payment on delivery), there is as yet no standard contract for the purchase of
emission reductions from projects. Contractual arrangements still vary greatly, depending on
how various risks are allocated between buyer and seller: in the case of project risk(s),
whether or not the project will adequately perform and produce the expected amount of ERs;
and in the case of country risk(s) and Kyoto-related risks, the risk that the project might
ultimately not be registered under the Kyoto Protocol (if, for example, the project is not
deemed additional by the CDM Executive Board). Various contractual features are used to
allocate these risks between the buyer and the seller. They include transfer of risk of the ERs
purchased (definition of the ERs, and point of delivery), guarantee structures, upfront
payments, penalties and damage clauses, default clauses or the disbursement schedule. The
limited data on the contractual structure of project-based transactions indicate that the
treatment of Kyoto-related risks is especially variable across contracts.
GHG emissions in India
India’s first National Communication (2004) is the latest official estimate of GHG emissions
from India. Table 3 summarizes the GHG emissions from various sectors by sources and
removals by sinks for India for the base year 1994. The aggregate emissions from the
anthropogenic activities in India totalled 793.49 million tons (MT) of CO2, 18.08 MT of CH4
and 0.18 MT of N2O. In terms of CO2 equivalent, these emissions amounted to 1,228.5 MT.
The per capita CO2 emissions were 0.87 T-CO2 in 1994, 4 per cent of the US per capita CO2
emissions in 1994, 8 per cent of Germany, 9 per cent of the United Kingdom, 10 per cent of
Japan and 23 per cent of the global average. On the basis of the global warming potential
(GWP) indices, CO2 emissions contributed 65 per cent of total GHGs, CH4 contributed 31 per
cent and 4 per cent of emissions were contributed by N2O.
14
Table 3. India’s initial national greenhouse gas inventories of anthropogenic emissions
by sources and removal by sinks of all greenhouse gases not controlled by the Montreal
Protocol for the base year 1994
GHG source and sink categories
(kilotons, kT, per year)
Total (net) national emissions
1
All energy
Fuel combustion
Energy and transformation industries
Industry
Transport
Commercial/institutional
Residential
All other sectors
Biomass burnt for energy
Fugitive fuel emission
Oil and natural gas system
Coal mining
2
Industrial processes
3
Agriculture
Enteric fermentation
Manure management
Rice cultivation
Agricultural crop residue
Emission from soils
Land use, land-use change and
4
forestry*
CO2
emissions
817 023
679 470
CO2
removals
23 533
353 518
149 806
79 880
20 509
43 794
31 963
CH4
N2O
18 083
2 896
178
11.4
CO2eq
emissions*
1 228 540
743 820
4.9
2.8
0.7
0.2
0.4
0.4
2.0
355 037
150 674
80 286
20 571
43 918
32 087
34 976
9
1 636
601
650
2
14 175
8 972
946
4 090
167
99 878
37 675
23 533
CO2
emissions
CO2
removals
14 252
6.5
CH4
4
146
12 621
13 650
102 710
344 485
188 412
20 176
85 890
4 747
45 260
0.04
14 292
N2O
CO2eq
emissions*
(14 252)
9
151
1
Changes in forest and other woody
biomass stock
Forest and grassland conversion
17 987
Trace gases from biomass burning
6.5 0.04
Uptake from abandonment of managed
9 281
lands
Emissions and removals from soils
19 688
Other sources as appropriate and to
5
the extent possible
5a Waste
1 003
7
Municipal solid waste disposal
582
Domestic waste water
359
Industrial waste water
62
Human sewage
7
5b Emissions from bunker fuels*
3 373
Aviation
2 880
Navigation
493
* Converted by using GWP indexed multipliers of 21 and 310 for converting CH4 and N2O
respectively.
Source: National Communication (2004).
15
17 987
150
(9 281)
19 688
23 233
12 222
7 539
1 302
2 170
3 373
2 880
493
Figure 5 graphically depicts the GHG emissions in India in 1994.
Figure 5. Sectoral GHG emissions, 1994 (total: 1,228 MT CO2eq)
Land use, land use
change and forestry
1%
Agriculture
28%
Others (including
waste)
2%
Energy
61%
Industrial Processes
8%
Source: National Communication (2004).
Energy-related GHG emissions are mainly a result of combustion of fossil fuels. Among the
fossil fuels, coal combustion had a dominant share of emissions, amounting to about 475.53
MTCO2eq GHGs (i.e. about 64 per cent of all energy emissions). The non-CO2 emissions in
this category are from biomass burning and fugitive emissions released from coal mining and
handling of oil and natural gas systems. An analysis of the distribution of the total CO2eq
emissions across all the sub-components of all energy activities indicates that the major
emitters were the energy and transformation industries (47 per cent), constituting mainly
electric power generation, industry (20 per cent) and the transport sector (11 per cent).
Eight per cent (i.e. 102.71 MTCO2eq) of total GHGs released in 1994, were from the industrial
process sector. These include CO2, CH4, and N2O emissions from production processes of
chemicals, metals, minerals, cement, lime, soda ash, ammonia, nitric acid, calcium carbide,
iron and steel, ferro alloys, aluminium, limestone, and dolomite use (table 4 and figure 6).
16
Table 4. CO2 emissions from India in 1994
GHG source and sink
CO2 (emissions)
CO2 (removals)
Categories (kilotonnes, kT)
Total CO2
817 023
1. All energy
Energy and transformation industries
Industry
Transport
Commercial/institutional
Residential
All other sectors
2. Industrial processes
Cement production
Lime production
Lime stone and dolomite use
Soda ash use
Ammonia production
Carbide production
Iron and steel production
Ferro alloys production
Aluminum production
3. Land use, land-use change and forestry
Changes in forest and other woody biomass stock
Forest and grassland conversion
Uptake from abandonment of managed lands
Emissions and removals from soils
4. Emissions from bunker fuels
Aviation
Navigation
679 470
353 518
149 806
79 880
20 509
43 794
31 963
99 878
30 767
1 901
5 751
273
14 395
302
44 445
1 295
749
37 675
Source: National Communication (2004).
17
23 553
23 533
14 252
17 987
9 281
19 688
3 373
2 880
493
Figure 6. Contribution of various industries to GHG emissions in 1994
Others
6%
Ammonia
14%
Iron and Steel
43%
Cement
30%
Lime, Limestone,
Dolomite
7%
Source: National Communication (2004).
In 1994, the agriculture sector contributed 29 per cent of total CO2eq GHG emissions,
amounting to 344.49 MTCO2eq. The agriculture sector mainly emitted CH4 and N2O. The
CO2 emissions due to energy use in the agriculture sector are accounted for as a part of all
energy emissions. The emissions sources accounted for in the agriculture sector are enteric
fermentation in livestock, manure management, rice cultivation, agricultural soils and
burning of agricultural crop residue. The bulk of the GHG emissions from the agriculture
sector were from enteric fermentation (59 per cent), followed by rice paddy cultivation (23
per cent), and the rest were contributed by manure management, burning of agriculture crop
residue and application of fertilizers to soils.
GHG emissions from the land use, land-use change and forestry (LULUCF) sector are an
aggregation of emissions from changes in forests and other woody biomass stock, forest and
grassland conversion, abandonment of managed lands, and forest soils. The net CO2eq
emission from this sector was 14.29 MT, which includes CO2 emission and sequestration, as
well as the emission of CH4 and N2O. The LULUCF sector emitted 14.142 MT net CO2 in
1994. Methane and N2O emissions from this sector were 0.137 MTCO2eq and 0.0124
MTCO2eq, respectively.
The disposal of waste and the processes employed to treat these wastes also create GHG
emissions. The two main sources of GHGs from the waste sector in India are municipal solid
waste disposal and wastewater handling for commercial and domestic sectors. The collection
of waste takes place primarily in large cities. In smaller cities and towns, waste decomposes
under aerobic conditions and thus methane is not emitted. The Ministry of Environment and
Forests (MoEF) treats industrial wastewater in India using the responsibility of large
industrial units. GHGs emitted from the waste sector in 1994 totalled 23.233 MTCO2eq,
which is 2 per cent of the total national CO2-equivalent emissions. Out of this, the major
18
contribution was from municipal solid waste disposal activities (53 per cent), followed by
domestic wastewater, which contributed 32 per cent of total GHG emissions from the sector.
Areas of potential CDM in India
A comparative analysis of GHG emissions from the energy sector (fuel combustion in
different sectors) in 1994 with the estimates for 2000 shows an increase from 744 to 922
MTCO2. The bulk of this increase is in the energy and transformation sector, and for the
most part includes fuel consumed for power generation (figure 7).
Figure 7. GHG emissions from fuel combustion
Source: National Communication (2004).
Given the predominance of the energy sector, the following areas have been identified for
mitigating GHG emissions:
1.
2.
3.
4.
5.
Electric power generation;
Renewable energy;
Industry — energy efficiency;
Transport; and
Municipal waste.
The potential reduction in GHG emissions up to the year 2012 (period 2004–2012) has been
estimated at 417 MTCO2eq and is presented in figure 8.
19
Figure 8. GHG mitigation potential in India in key sectors
Industries
41 MTCO2eq
Transport
57 MTCO2eq
Power Generation
319 MTCO2eq
Source: National Communication (2004).
CDM potential in India’s electric power sector
Figure 9 shows that the GHG mitigation potential of 319 MTCO2eq through 2012 can be
realized through fossil fuel utilization improvement (102 MTCO2eq), municipal solid waste
(MSW) to energy (63 MTCO2eq) and renewable energy technology (154 MTCO2eq).
Figure 9. GHG mitigation potential from power generation in India
Source: National Communication (2004).
20
Overview of India’s electric power industry
Figure 10 shows the rapid increase in India’s power generation capacity, which currently
stands at 115,000 MW.
Figure 10. Growth of India's electric power generation capacity
Source: Ministry of Power, Government of India (2005).
Although installed capacity in India has been growing, the supply of electricity has been
unable to keep pace with the growth in demand. For instance, in January 2005, the shortfall
in electricity supply was 12.4 per cent at peak demand (Central Electricity Authority,
Ministry of Power, http://cea.nic.in/exe_summ/jan/21.pdf). In addition, a high electrical
energy – GDP elasticity of 1.5 in India between 1985 and 1985, three times that in the United
States, has resulted in considerable pressure to increase electricity supply from new and
existing capacity. This large elasticity reflects the inefficiency of existing energy-using
technologies in India, and the high energy-intensiveness of basic infra-structural industries,
which contribute proportionately less to GDP.
The distribution of electric power generation is shown in figure 11.
21
Figure 11. Distribution of power generation (115,545 MW), by sector
Source: Ministry of Power, Government of India (2005).
The electricity sector in India is largely owned by the state and central governments. Of the
total installed capacity in 1990–1991, the State Electricity Boards (SEBs) accounted for 63
per cent, the central sector power corporations (owned by the central government) for 33 per
cent, while private corporations accounted for only 4 per cent. The SEB is a vertically
integrated industry responsible for generation, transmission and distribution of electricity for
the entire state. Although state governments are required only to play an advisory role, in
practice they have played an influential role in setting electricity prices for SEBs on the basis
of social considerations and political interests. As a result, prices for domestic and
agricultural consumers have been set below the average cost of generation and supply, while
those for commercial and industrial use are above the average cost. In spite of this crosssubsidization, average revenue is still less than average cost and the gap has increased over
time. This, together with non-payment of bills by customers and energy theft during
transmission (20–25 per cent), has resulted in large financial losses for the SEBs, which have
to be met through government subsidies. The average rate of return for all SEBs was
negative, at –13.5 per cent in 1995.
The poor performance of India's existing generating units has been a principal cause of power
shortages and unreliable quality of power supply. The main culprits are the coal-fired thermal
power stations, which account for 60 per cent of total installed capacity. The average plant
load factor (PLF) of thermal power stations in India is less than 60 per cent, but varies
considerably across regions. In 1989/1990, the southern region had the highest PLF (65.6 per
cent), while the eastern and the north-eastern regions recorded low PLFs of 38.5 per cent and
26.8 per cent, respectively. In contrast, hydropower stations have far better track records
since their performance relies largely on water flow.
22
The main reasons for the under-performance by the coal-fired thermal plants are as follows:
1. Design deficiencies, manufacturing and generic defects;
2. The operation and maintenance (O&M) deficiencies, causing prolonged and repeated
forced outages;
3. Inadequate and non-timely availability of spare parts, especially for imported
equipment;
4. Lack of resources for SEBs even for making payments to providers for supplies and
services, and to coal companies for coal supplies. Consequently, the SEBs were not
able to take up the renovation and modernization programmes to the extent required;
5. The quality of coal being supplied had deteriorated as compared with the design
quality. For instance, the heating value of Indian coal has dropped from 6,000 kcal/kg
in the 1960s to the current 4,000 kcal/kg. Furthermore, the coal has a high ash
content (40 per cent) and contains stones, boulders, shale and sand; and
6. There was excessive and inadequately trained manpower for the O&M of the plant.
However, not all the thermal generating stations have such dismal records. For instance, the
performance of 500 MW and 200 MW units has been satisfactory, and their PLFs have been
higher than the national average. It is, in fact, the thermal units of 120/140 MW and below
that are cause for concern. Most of these units have already logged more than 100,000
running hours and their performance can be improved only through a long-term rehabilitation
or re-powering programme.
Better utilization of power generation technology
The Ministry of Power has identified 170 thermal units with installed capacity of 11,000 MW
and 35 hydroelectric units with installed capacity of 3,000 MW that need renovation and
modernization (R&M) and life extension (LE). Upgrading their performance/life extension
is a cost-effective method of capacity creation (Rs. 10 million per MW for thermal and Rs. 67 million per MW for hydro as compared with Rs. 40 to 50 million per MW for new
greenfield power projects). A state-wide R&M action plan is being formulated. R&M
measures include installing more efficient equipment such as boilers, furnaces, pumps,
turbines and generators, improving maintenance procedures and implementing coal
beneficiation processes such as coal washing for optimal utilization of coal. An annual
additional generation benefit of about 90 billion units (20 per cent of existing annual
generation) is expected through R&M measures. Under the Accelerated Power Development
Programme (APDP) funds would be provided for R&M schemes. As a result of R&M/LE
improvements, the plant load factor of the thermal plants concerned has increased from 49 to
75 per cent (Ministry of Power, http://powermin.nic.in/JSP_SERVLETS/internal.jsp).
CDM projects in four areas (see below) have the potential to be developed in power
generation, although none has yet been submitted by India to the Executive Board of
UNFCCC.
23
Integrated Gasification Combined Cycle (IGCC)
IGCC technology heats coal to the point of gasification with steam in a controlled supply of
air. The gas product contains hydrogen and carbon monoxide and is scrubbed to remove
hydrogen sulphide. The cleaned gas is combusted, and the hot gases are expanded to drive a
gas turbine and produce electricity. The turbine exhaust gas is still hot and is used to produce
steam and drive a steam turbine, as well as to generate additional electricity. Overall
efficiency is above 45 per cent. There is no particulate matter or hydrogen sulphide emission.
The major drawback to this technology is capital cost, which may be offset by CDM revenue.
Cogeneration and combined cycle
In cogeneration and combined cycle, high-pressure steam is generated in boilers and fed to a
high-pressure steam turbine that produces electricity. The exhaust from the high-pressure
steam turbine still has thermal energy and can be used as process steam for providing heat.
This is called cogeneration since electricity and heat have been produced. If the exhaust from
the high-pressure turbine is sent to an intermediate pressure turbine, further electricity can be
generated. This is the combined cycle, where efficiencies can exceed 45 per cent.
Supercritical thermal plants
Above a pressure of 22.1 mega pascals (225 kg/cm2) and a temperature of 374oC, water is in
a supercritical state, with no distinction between the vapour and liquid states. In a normal,
sub-critical boiler, the vapour (steam) has to be separated from the liquid before being sent to
the steam turbine. In supercritical boilers, no separation is needed. The only difference in
supercritical thermal plants is the special material of construction, such as inconel, a nickelbased alloy, required to withstand the elevated pressures in feedwater pumps and feedwater
train equipment. Over 400 supercritical thermal plants are in operation worldwide, many
with efficiencies of over 45 per cent.
Fluidized bed combustion
The coal is burnt in a bed through which hot air is passed, fluidizing the bed. At lower air
velocities, the coal particles are in bubbling motion (bubbling fluidized bed combustion), but
at higher air velocities the coal particles take on circulatory motion (circulation fluidized bed
combustion). As the coal particles are burnt away and become smaller, they are elutriated
with the gases, and subsequently removed as fly ash. In-bed tubes are used to control the bed
temperature and generate steam. The flue gases are normally cleaned using a cyclone, and
then pass through further heat exchangers, raising steam. The steam drives the steam
turbines, producing electricity. Fluidized bed combustion is more efficient than the common
pulverized coal combustion, especially for high-ash coal usually available in India.
Combustion in a fluidized bed takes place at 800–900oC instead of the 1200–1400oC in a
pulverized coal combustor, thus resulting in reduced emission of nitrous oxides and
particulate matter to the atmosphere.
24
A comparison of the cost and benefits of some of the above technologies is as follows:
Abatement
cost
GHG mitigation option
Fluidized bed combustion
Renovation and modernization
Integrated Gasification Combined Cycle
Low
High
High
National mitigation
potential (million ton
CO2/year)
8.2
8.6
14.6
Fuel switching in power generation
Switching to fuels with a lower carbon-to-hydrogen ratio, such as from coal to oil or natural
gas, and from oil to natural gas, can reduce emissions. Natural gas has the lowest CO2
emissions per unit of energy of all fossil fuels, at about 15 kg C/GJ, compared with oil with
about 20 kg C/GJ and coal with about 25 kg C/GJ (all based on low heating values)
(Intergovernmental Panel On Climate Change Technologies, Policies and Measures for
Mitigating Climate Change, November 1996). The lower-carbon-containing fuels can, in
general, be converted with higher efficiency than coal. For instance, the efficiencies of a
coal-fired plant and natural-gas-fired plant are 30 per cent and 45 per cent, respectively.
Thus the reduction in CO2 emission when switching from coal to natural gas is 50 per cent
per kWh of electricity generated.
Five CDM fuel-switching projects (to natural gas) have been submitted to the Executive
Board from India. They are as follows:
1. A 1,050 MW natural-gas-based grid-connected combined cycle power generation
project at Akhakhol by M/s Gujarat Torrent Power Generation Limited;
2. A 535 MW project by Essar Power Limited at its power plant at Hazira in Surat
District, Gujarat;
3. A 200 MW project for switching of fuel from naphtha to natural gas by BSES Andhra
Power Limited (BAPL) at its CCGT power plant at Samalkot, East Godavri District,
Andhra Pradesh;
4. A 25 MW natural gas captive power plant, Coromondal Electric company Ltd, Tamil
Nadu; and
5. An 18 MW natural gas plant, OPG Energy Private Ltd., Tamil Nadu.
CDM potential in renewal energy (RE) technology
The Government of India is making a concerted effort to promote renewal energy technology.
Fifty-five per cent of the 80 projects approved by the Indian CDM Authority are in the RE
sector. India is the only country in the world that has a dedicated ministry for promoting
renewable energy, the Ministry for Non-conventional Energy Sources (MNES), and an
exclusive public sector financial sector, the Indian Renewable Energy Development Agency
(IREDA). MNES prepared between 1993 and 1996 a set of guidelines for “Promotional and
Fiscal Incentives by State Governments for Power Generation from Non-Conventional
Energy Sources". These guidelines were designed to bring about a level playing field for
power generation from renewable energy sources. Salient features included a preferential
25
tariff of 4.5 ct /kWh beginning in 1993 with a 5 per cent annual escalation, allowing third
party sale and captive use, ensuring timely payment of purchased electricity, long-term
Purchasing Power Agreements (PPA), providing grid connectivity, creating the infrastructure
for power utilization, streamlining the procedures for various statutory clearances, and
exemptions from certain sales tax and electricity duty. In addition, concessionary duties for
imported RE equipment were granted to RE providers, and arrangements were made for soft
loans and a long-term debt facility.
The Electricity Act of 2003 has several provisions favourable for RE power, including rural
electrification. Under the proposed open access scheme expected to be in place by the middle
of 2004, the Independent Power Producers (IPP) can set up RE power plants for captive use,
third party sale, power trading companies, and their own transmission and distribution. The
Act also directs the Central Government to prepare national electricity and tariff policies,
including RE-based power, and currently MNES is in the process of developing the same for
RE. The most important feature and the highlight of the Act are that it empowers the State
Electricity Regulatory Commissions (SERCs) to promote RE and specify, for purchase of
electricity from RE sources, a percentage of the total consumption of electricity in the area of
a distribution licence. This is considered a major boost for promotion of the RE sector in
India. In other words, once it is enacted, the utilities in the state will be having a target of
procuring RE-based power up to a certain percentage as specified by the SERC.
The Government of India has announced that 10 per cent of the new electrical power capacity
of 100,000 MW to be installed between 2002 and 2012 will be from RE. The renewable
energy plan is as follows:
Sector
Wind energy
Biomass power, including cogeneration
Small hydropower
Municipal, urban and industrial wastes
Solar thermal
Solar photovoltaic cells
Total
Target
5 000 MW
3 000 MW
2 000 MW
400 MW
250 MW
30 MW
10 680 MW
10,000 MW (approx.)
Source: Indian Renewable Energy Development Agency.
The RE plan includes the following:
•
•
•
•
Electrification of all unelectrified villages to the extent possible in a decentralized
mode;
Minimum cooking energy from renewables for all households;
Cost-effective energy for water pumping, irrigation, drinking and rural electrification;
and
More women’s participation in RE programmes for their employment and
empowerment.
26
The installed RE power-generating capacity is as follows:
Sector
Potential
Wind
Small hydroelectric (up to 25 MW)
Biomass (including bagasse cogeneration)
Waste-to-energy
Solar photovoltaic
Solar water heating
45 000 MW
15 000 MW
19 500 MW
1 700 MW
20 MW/sq km
140 million m2
collection area
Achievement as
of 31.03.2002
1,617 MW
1,438 MW
381 MW
22 MW
85 MW
0.6 million m2
collection area
Source: Indian Renewable Energy Development Agency.
Economics of renewable energy
Capital cost
(million $/MW)
0.69 to 1.38
0.80 to 0.92
0.69 to 0.92
0.57 to 0.69
0.57 to 0.69
5.70 to 6.89
Sector
Small hydroelectric
Wind energy
Biomass power
Bagasse cogeneration
Biomass gasification
Solar photovoltaic
Generation cost
($/KWh)
0.023 to 0.046
0.046 to 0.063
0.04 to 0.046
0.04 to 0.046
0.03 to 0.34
0.23 to 0.37
Source: Indian Renewable Energy Development Agency.
Barriers in commercializing biomass energy projects
Technical
•
•
•
•
•
•
•
•
Diverse biomass resources and possible biomass — specificity of technologies;
Low energy density and large bulk;
Seasonality, particularly in the case of agricultural residues;
Localized price sensitivity due to relatively high cost of transportation; associated
vulnerability of bioenergy projects;
Minimum size of sugar plant is 2,500 tons crushed per day (TCD);
Inadequate technical and managerial skills, and trained manpower;
Inadequate technology, design, development of biomass handling, storage,
transportation and retrieval system; and
Perception of “bio-resources” as low-tech fuels.
Financial
• Most of the sugar plants are in the cooperative sector;
• Reluctance on the part of financial institutions (FIs) to fund bioenergy projects;
• FIs demand a high debt equity ratio (1:1) for funding bioenergy projects, resulting
in a large contribution from the promoter; and
• Limited domestic and international funds for biomass energy projects.
27
Utility/SEB-related
• There is no compensation for grid fluctuations/failure by SEB;
• There is no cost sharing with RE developers for installation of transmission
lines/grid evacuation equipment; and
• Clear-cut carbon trading mechanisms are not in place.
Financing from IREDA for renewable energy projects
The Indian Renewable Energy Development Agency offers attractive financing schemes,
such as loans of up to 85 per cent of the project cost and up to 75 per cent of the equipment
cost; a 5 to 14 per cent rate of interest; a moratorium of up to three years in loan repayment;
and a repayment period of up to ten years. For biomass projects (except bagasse), the
maximum loan amount is 70 per cent of the project cost.
CDM projects in renewable energy
One of the biggest barriers that CDM project developers face is the additionality issue. If a
CDM project receives assistance from the Government, such as a mandated purchasing
power agreement with the State Electricity Board or an attractive tariff for the sale of
electricity, the project is not considered additional by the UNFCCC Executive Board, and
thus it is ineligible for CDM approval and CDM revenue. Nevertheless, 44 CDM projects on
renewable energy have received host-country approval from the Ministry of Environment and
Forests, the designated national authority for CDM in India. The majority of these projects
are in the biomass (41 per cent), bagasse (23 per cent) and hydroelectric (23 per cent) sectors.
The distribution of these 44 projects by sector is shown in figure 12.
Figure 12. Distribution of RE projects, by sector
Gasifier
2%
Hydroelectric
23%
Biomass (excl.
bagasse)
41%
Biogas
2%
Biodiesel
2%
Manure
2%
Bagasse
23%
Wind
5%
Source: Ministry of Environment and Forests, Government of India.
28
Biomass (excluding bagasse) projects
Eighteen CDM projects have been approved by the Indian CDM authority for submission to
the Executive Board (EB). The biomass used as fuel for generating power includes rice husk
and cotton stalks. The 7.8 MW biomass project in Rajasthan using mustard crop residue has
been accorded registration by the EB. In addition, the 12 MW biomass project by Clarion
Power Corporation in Andhra Pradesh has been validated by the EB and is in the process of
being registered.
Bagasse projects
India’s sugar industry is the second largest in the world, after Brazil. The annual sugarcane
output is 320 million tons, which results in about 270 million tons of bagasse. There are 430
sugar mills in India, most of which use bagasse to generate steam. However, an increasing
number of mills are turning to cogeneration to produce electricity. There are 10 CDM
projects approved by the CDM authority on cogeneration that use bagasse. For
commercialization of bagasse cogeneration, the minimum size of the mill is 2,500 tons
crushed per day (TCD). The average generation cost of electricity from bagasse is Rs.
2/kWh.
Hydroelectric projects
Ten small hydroelectric CDM projects (4 to 20 MW) have been approved by the Indian CDM
authority. All these projects are run-of-the-river projects, none of which involve construction
of dams. The 5 MW grid-connected Dehar Hydroelectric Project in Himachal Pradesh has
been accorded registration by the EB.
Wind projects
A 3 MW and a 16.8 MW wind project in Karnataka have been approved by the Indian CDM
authority. In addition, a 15 MW project by Suzlon and a 14.48 MW project by Vestas, both
in Tamil Nadu, were submitted to the EB, independently of approval by the Indian CDM
Authority.
Manure projects
A 7.5 MW poultry-litter-based power plant has been set up by Raja Bhaskar Power Pvt. Ltd.
in Karnataka.
Biogas projects
A biogas CDM project has been set up by ADATS in Bagepalli, Karnataka.
29
Gasification projects
A CDM project involving five biomass gasifier-based power plants totalling 2 MW in various
locations throughout Karnataka and Tamil Nadu is being developed by Women for
Sustainable Development.
Biodiesel projects
A 30-ton per day biodiesel project in Samasthan Narayanpur village, Andhra Pradesh, is
being set up by Southern Biotechnologies.
Improved energy efficiency in industry
Improvements in energy efficiency lead to reduced use of fuel and a consequent reduction of
CO2 produced by burning the fuel. Energy efficiency enhancements have been implemented
in the following energy-intensive industries in India:
1.
2.
3.
4.
5.
Iron and steel;
Cement;
Fertilizer;
Aluminium; and
Pulp and paper.
Iron and steel
India is the world’s ninth largest producer of steel, with an output of 34.8 million tons in
2004. It is also the largest producer of sponge iron. Iron is produced in a blast furnace by the
reduction of iron oxides by carbon monoxide. The feed consists of iron ore (oxides), coke
and lime, and is introduced at the top of the furnace. Preheated air is blown through nozzles
at the bottom of the furnace. The oxygen in the blown air converts the coke to carbon
monoxide, which in turn reduces the iron oxides to iron. The molten iron and slag are drawn
off from the bottom of the furnace and the furnace gases leave from the top. Energy
efficiency can be achieved by using the hot furnace gases to heat the air entering at the
bottom of the furnace, thereby reducing the fuel needed to preheat the air, or by raising steam
in a waste heat recovery boiler (WHRB). Another way to save energy is dry coking. The
coking coal is first created by heating coal in the absence of air and then cooling it by
quenching it with water. In dry quenching the hot coke is air-cooled. The hot air can be used
for raising steam in a WHRB to produce electricity via a steam turbine.
Steel is manufactured from iron by oxidizing the impurities such as carbon, silicon and
phosphorus in a basic oxygen furnace (BOF). The exhaust gas is hot and contains carbon
monoxide. This gas can be further combusted to drive a gas turbine and generate electricity.
Currently, a total of 12 CDM projects on improved energy efficiency (heat recovery from
waste gases) in the iron and steel industry have been submitted by the following:
1. Shri Bajrang Sponge Iron Works;
2. Ispat Godavari Ltd. Sponge Iron Mfgr;
3. Industrial Growth Centre;
30
4.
5.
6.
7.
8.
9.
10.
11.
12.
Tata Iron and Steel (TISCO);
Usha Martin;
Jindal Vijayanagar COREX;
Jindal Vijayanagar BOF;
TSIL Power Plant;
Orissa Sponge Iron Limited;
OCL India Limited Sponge Iron Works;
Shri Rampurai Balaji Steel Limited (SRBSL); and
Jai Balaji Sponge Limited (JBSL).
Cement
Cement manufacture is a highly energy-intensive process involving the production of clinker
by roasting lime (calcium carbonate) and siliceous material at elevated temperatures. The
process produces 0.34 ton carbon per ton of cement (60 per cent from energy used in
production and 40 per cent as a process gas). A new technology called Lower Cement
Concrete Technology (LCCT) lowers the cement content through (a) use of high-range waterreducing admixtures, and (b) a partial replacement of cement clinker with alternative
cementitious materials such as fly ash.
There are four CDM projects on energy efficiency in the cement industry through WHRBs:
1. Jaypee Associates (Cement) Madhya Pradesh;
2. Hindusthan Cement — energy efficiency of construction in cement industries across
various locations in India;
3. Shree Cement Limited; and
4. JK Cement Works (Unit of JK Cement Limited).
Fertilizer
The main ingredient of fertilizer is ammonia produced by the reaction between hydrogen and
nitrogen at a temperature of 450oC over an iron oxide catalyst. Huge electric-driven
centrifugal compressors bring the pressure up to 250 bar. Improvements in compressor
technology can reduce the power requirements, thus reducing the amount of emitted CO2.
However, most of the CO2 is produced in the manufacture of hydrogen through a process
called steam reforming of hydrocarbons, usually methane CH4:
CH4 + H2O → CO + 3H2
CO + H2O → CO2 + H2
(steam reforming)
(shift reaction)
The CO2 is absorbed in a solution and then expelled using steam. A CDM project proposed
by IndoGulf Fertilizers uses waste heat from other process streams. Thus the amount of
steam required is decreased, and this leads to lower fuel consumption and a decrease in CO2
emissions.
Aluminium
Aluminium production also requires a highly energy-intensive process. To manufacture
aluminium, bauxite ore (Al2O3) is melted in a smelter and then electrolysed. Aluminium
collects at the cathode, and the oxygen goes to the carbon anodes, where it reacts to form
31
CO2. The newer, more efficient technology from ALCOA leads to a smaller amount of CO2
produced. These improvements are due in part to the computerization of smelting cells, an
improvement that has largely been unrecognized outside the industry. The computer takes
into account the various current operating variables so that the voltage in the pot is always the
best for prevailing conditions. Other energy-saving advances include the following:
• Improvements in bath chemistry to lower both the smelting temperature and heat
losses, and to increase the efficiency of the use of electrical current;
• Improved insulation to reduce heat losses;
• Improved baking technology for carbon anodes;
• Reduced carbon anode consumption per kilogram of aluminum produced.
Pulp and paper
The pulp-making process generates effluent with high organic load through a series of
washing steps where part of the lignin in the pulp is removed from weak black liquor. The
black liquor generated from the pulping process is concentrated at the evaporator to a desired
solids level for firing at a soda recovery boiler (SRB). The method proposed by ITC Paper in
their CDM project for increasing recovery of additional waste biomass (black liquor solids)
for steam generation uses oxygen delignification coupled with efficient free-flow falling film
evaporation. Thus, the increased black liquor solids reduce the requirement for fossil fuel in
the steam boiler, and this leads to lower CO2 emissions.
Figure 13 shows the potential for GHG emission reduction through energy efficiency
improvements in some of the major industries in India.
Figure 13. GHG mitigation potential from industries in India (57 MTCO2eq) until 2012
HFC23
12 MTCO2eq
Iron and Steel
14 MTCO2eq
N2O
10 MTCO2eq
Fertilizer
14 MTCO2eq
Aluminium
3 MTCO2eq
Cement
5 MTCO2eq
Source: National Communication (2004).
Thermal destruction of HFC-23
HFC-23 (chemical formula CHF3) is a greenhouse gas with a global warming potential
(GWP) of 11,700, the highest GWP in UNFCCC’s basket of GHG gases. It is a by-product
32
formed during the manufacture of HCFC-22 (chemical formula CHClF2), a refrigerant. In
the certified CDM project proposed by Gujarat Fluorochemicals Ltd., HFC-23 is burnt in an
oxidizing chamber at 1,200oC as per the following equation:
CHF3 + H2O + ½ O2
CO2 + 3 HF
Thermal destruction of N2O
Nitrous oxide, chemical formula N2O and GWP of 310, is formed during fuel combustion in
thermal plants and automobile engines where high temperatures cause nitrogen and oxygen in
combustion air to combine to form N2O. Typically, nitrogen oxides (NOx) scrubbers are
installed at power plants to remove the nitrogen oxides from the effluent stack gases. In
some cases the N2O is first oxidized to NO before it is absorbed (scrubbed) in a solution.
There are also catalytic converters designed to convert N2O to the harmless N2 by reacting
with ammonia. N2O is a by-product in the manufacture of nitric acid and adipic acid, the
latter being an important intermediary in the production of nylon.
Although there are currently no N2O CDM projects in India, two CDM projects have been
proposed by Rhodia Polyamide, a manufacturer of adipic acid and nylon, at its plants in
Onsan, Republic of Korea, and Paulina, Brazil. The process involves combining N2O with
methane in a combustion chamber and burning the mixture at 1,300oC. The reaction is:
CH4 + 4N2O
CO2 + 2H2O + 4N2
GHG mitigation in the transport industry
Fuel substitution from petrol to natural gas leads to reduction of CO2 emissions. Under
government mandate, taxis and some public transport buses have been fitted with engines
running on compressed natural gas (CNG) in the major metropolitan areas of Delhi and
Mumbai. Coal-fired locomotives have been replaced by diesel-powered engines wherever
possible on the State-run Indian Railways system. A CDM project proposed by E. F. Energy
Ltd. plans to offer AutoLPG (a mixture of propane and butanes) as an alternative automobile
fuel in India to 4-stroke 2-wheeler motorcycles and scooters, 4-stroke 3-wheelers, private
cars, taxis, multi-utility vehicles (MUVs), minibuses and light commercial vehicles (LCV).
The project proponents plan to set up 1,493 AutoLPG retail outlets by 2008.
The biofuels, ethanol and biodiesel, will play an important role in reducing the dependence
on petroleum while reducing CO2 emissions The Government of India has announced a plan
to replace 5 per cent petrol by ethanol and 20 per cent diesel by biodiesel by 2012. Ethanol is
produced by fermenting sugarcane juice and biodiesel is manufactured by the
transesterification of vegetable oil obtained from oilseeds such as Jatropha. Southern
Biotechnologies of Hyderabad, Andhra Pradesh, has announced a CDM project which will
set up a 30 ton per day biodiesel plant using vegetable oil feedstock. The annual CO2
emission reduction is estimated to be about 24,000 tons.
Power generation from municipal solid waste (MSW)
Power generation from MSW is an important process for GHG emission reduction and is the
basis for several CDM projects worldwide. In India, Asia Bioenergy India Ltd. (ABIL) is
33
developing a 5.1 MW power plant at the MSW treatment site in Lucknow. The solid waste is
separated and the organic degradable matter is anaerobically digested to produce methane,
which serves as the fuel for the power plant. In addition, from 300 tons per day of MSW, 75
tons of organic manure is obtained as by-product.
National CDM Authority
The Ministry of Environment and Forests (MoEF) is the nodal ministry dealing with climate
change and CDM issues in India. It established the Designated National Authority (DNA) in
December 2003 as the National CDM Authority (NCDMA). The NCDMA is chaired by the
Secretary of MoEF. The other members are the Ministry of External Affairs Secretary, the
Ministry of Finance Secretary, the Secretary, Department of Industrial Policy and Promotion,
the Ministry of Non-conventional Energy Sources Secretary, the Ministry of Power
Secretary, the Planning Commission Secretary and the MoEF Joint Secretary of Climate
Change. The Member-Secretary of the NCDMA is the Climate Change Director of MoEF.
The above flow diagram depicts the approval process for a CDM project. The project
developers first submit the Project Concept Note (PCN) and the Project Design Document
(PDD). These documents are circulated for review by the NCDMA members, who then call
the project developers for a presentation at a regularly scheduled once-a-month meeting. Any
clarifications/additional information from the project developers are sought when required by
the NCDMA members. If all the requirements are met, India gives host country approval.
The entire process for host country approval takes 60 days. No fees are charged by the
34
National CDM Authority. The project developers then present their documents to the CDM
Executive Board for approval and registration.
Indian CDM National Authority’s approval criteria
A project proposal should establish the following in order to qualify for consideration as a
CDM project activity:
Additionalities:
• Emission additionality. The project should lead to real, measurable and long-term
GHG mitigation. The additional GHG reductions are to be calculated with
reference to a baseline.
• Financial additionality. The funding for CDM project activity should not lead to
diversion of official development assistance. The project participants may
demonstrate how this is being achieved.
• Technological additionality. The CDM project activities should lead to transfer of
environmentally sound technologies and know-how.
Sustainable development indicators
It is the prerogative of the host Party to confirm whether a clean development mechanism
project facilitates sustainable development in its country. Also, a CDM should be oriented
towards improving the quality of life of the very poor from an environmental standpoint. The
following aspects should be considered when designing CDM project activity:
1. Social well-being. The CDM project activity should improve the quality of life of
people through poverty alleviation, job creation, social disparity removal and the
provision of basic amenities.
2. Economic well-being. The CDM project activity should attract additional
investment consistent with the needs of the people.
3. Environmental well-being. The project should include a discussion of its impact
on resource sustainability, resource degradation, biodiversity friendliness, impact
on human health and reduction of pollution levels in general.
4. Technological well-being. The CDM project activity should lead to transfer of
environmentally sound technologies, with priority given to renewable and energy
efficiency projects consistent with best practices in order to assist in upgrading the
technological base.
Baselines
The project proposal must clearly and transparently describe the methodology used to
determine baselines. Methodologies should:
•
•
•
•
•
•
Create baselines that are precise, transparent, comparable and workable;
Avoid overestimation;
Be homogeneous and reliable;
Indicate potential errors;
Establish system boundaries of baselines;
Describe clearly intervals between baseline updates of baselines;
35
• Highlight the role of externalities (social, economic and environmental);
• Include historical emission data sets wherever available; and
• Mention the lifetime of the project cycle clearly.
Baselines should be created on a project-by-project basis except for those categories that
qualify for simplified procedures. The project proposal should indicate the formulae used for
calculating GHG offsets in the project and baseline scenario. Leakage, if any, should be
described. For the purpose of project concept notes (PCN), default values may be used with
justification. Determination of the base project, which would have come up in the absence of
the proposed project, should be clearly described in the project proposal.
Financial indicators
The project participants should highlight the following financial aspects:
Flow of additional investment;
Cost-effectiveness of energy saving;
Internal rate of return (IRR) without accounting for CERs;
IRR with CERs;
Liquidity, NPV, cost/benefit analysis, cash flow, and so forth, establishing that
there is a strong probability that the project will eventually be implemented;
• Agreements reached with the stakeholders, if any, including power purchase
agreements, memorandum of understanding, and so forth;
• Inclusion of indicative costs related to validation, approval, registration,
monitoring and verification, certification and share of proceeds; and
• Available funds, financing agency, and a description of how it is sought to achieve
financial closure.
•
•
•
•
•
Technological feasibility
The proposal should include the following technical elements:
The proposed technology/process;
Product/technology/material supply chain;
Technical complexities, if any;
Preliminary designs and schematics for all major equipment needed, design
requirements, manufacturer's name and details, and capital cost estimates;
• Technological reliability;
• Organizational and management plan for implementation, including timetable,
personnel requirements, staff training, project engineering and CPM/PERT-Chart.
•
•
•
•
Risk analysis
The project proposal should clearly state risks associated with a project, including
apportionment of risks and liabilities as well as insurance and guarantees, if any.
Credentials
The credentials of the project participants must be clearly described.
36
Financing structures for CDM-eligible projects
Conventionally, the CDM projects in India eligible for CDM investments have made use of
standard financial instruments offered by banks/financial institutions (FIs).
Equity financing
Equity funds are basically company owners’ funds either raised through a fresh share issue or
brought in through reinvestment of profits. At any time, the cash-generating companies are
looking for possible projects for investment so as to improve their profitability. The main
criterion for investment in projects is incremental revenue from them. The project that
performs best in terms of return on capital will have priority in the use of equity capital.
However, many companies have policies that fix a base rate of return below which the money
will be invested in short-term deposits or other safe securities. This “hurdle” rate affects
management decisions. The decision-making process follows the steps shown below:
Idea generation
Various sources
Pre-feasibility
study
Initial screening
Dept. concerned
Strategic planning/TEC
Techno-economic
feasibility study
Techno-economic
consultant (TEC)
The return on investment target varies from company to company, as does risk aversion.
Many organizations also have policies by which they give preference to certain sectors. This
may be on account of a higher risk perception or policies against diversifying into unrelated
sectors. Generally, investments to upgrade operations or expand captive power supply would
be most attractive as they improve the overall operational efficiency of the company. The
policies on clean energy projects do not follow a focused approach. Very little distinction is
made between these and other projects. The Indian industry weighs these projects for their
fiscal benefits against the hurdles for the power purchase agreement and transaction costs for
mobilization of subsidies by the Ministry of Non-conventional Energy Sources (MNES).
Large corporate entities often shun clean energy projects, especially renewable energy
projects. The main reason for their reluctance is the small investment size involved, which
leads to a higher percentage of overhead costs. This trend is gradually changing, however,
especially since there is greater awareness of the energy cost in energy efficiency projects.
For example, Tata Iron & Steel Company has converted many of its efficiency and debottlenecking projects into carbon offset projects. The company is currently negotiating with
Japanese investors. As the carbon market matures, the carbon investments in CDM projects
by creditworthy Indian companies may shift to a form of equity capital. Global investors have
a higher risk perception and a greater ability to absorb liability.
Venture capital and special mutual funds
The mutual funds sector has been developing progressively in India over the last decade or
so. Many professional fund managers in collaboration with international fund managers have
floated several funds in the last two years. Some of these have specialized in specific sectors
such as pharmaceuticals and telecommunications. Similarly, venture capital funds have
37
grown over the past decade and half. There are some venture capital funds that specialize in
the energy sector. A CDM fund would be feasible as the CDM market gains momentum. At
present, among existing mutual and venture capital fund managers awareness about
UNFCCC and market mechanisms such as CDM is limited.
Corporate finance
The current trend among banks is to consider a corporate entity as a whole when deciding
credit ratings. The investments considered by banks/FIs include, apart from capital
investments, other fund requirements such as payments for voluntary retirement schemes.
The main security for corporate loans is the balance sheet. The lending institution conducts a
due diligence of the company’s operations and gives it a credit rating. On the basis of the
rating and the risk premium practices, the applicable rate is decided. The actual investments
in individual purposes are left to the company concerned. The financial institutions could
consider CDM projects as a part of corporate clients' investment programmes. However,
separate monitoring and verification of such projects are essential.
Lending
Some years ago, the development finance institutions (DFIs) were engaged in pure lending
for concrete projects. The process involved a detailed appraisal of the promoter, the market
for the product/service, project cost and profitability. Today, only a few of the long-term
lending institutions, such as PFC, IREDA, IDFC and select banks, are engaged in this
activity. However, the majority of the renewable energy projects that have been cleared in
India have been able to get loans from these institutions. This is mainly due to the mandates
and subsidies given by the Government to the above-mentioned FIs promoted by it. These
institutions are already considering the CDM benefits that a project may be able to generate.
They are, however, debating the appropriate way in which CER revenues can be integrated
into the profitability analyses of the CDM projects. Another major lending instrument is
debentures issued by companies. These are debt instruments, which are issued through public
or limited offer. Normally, they are rated by rating companies such as CRISIL or ICRA.
Similarly, large corporate houses raise money in the financial market by issuing commercial
paper because their credit rating enables them to borrow over short terms at market rates.
There are many such companies that are in good standing in the market and on the bourses.
Merchant financing — Lease/equipment finance
Though not prevalent in the case of CDM-eligible projects, this could be one possible route
for investors, especially those supplying equipment/technology. Here the assets leased out
remain on the balance sheet of the borrower, who is able to claim depreciation benefits.
Obviously, the implicit interest rates would be higher than in the case of equity and, it is
likely, also corporate financing.
Project finance
This route is emerging mainly for infrastructure projects that involve large investments and
whose revenue accrues over a long period (15–20 years). Essentially, this future income
stream is securitized and funding is provided to the proponent, which could be a specially
floated new entity or special purpose vehicle (SPV). Underlying the income stream is a
38
contract or a concession that provides comfort to the lenders and strategic investors. This
structure is most suitable for CDM projects as the CERs accrue from year to year and an
emission reduction purchase agreement (ERPA) would be the underlying contract.
Banking sector structure
The structure and the operation of the banking system in developing countries are crucial for
speedier implementation of CDM projects. The Indian banking system has undergone several
changes in the recent past. The development banking system, which financed long-term
projects with long-term financial instruments, has almost been dismantled as their funding
sources have shifted to shorter terms. The duration has decreased from 8–10 years to 3–5
years. In addition, the asset–liability mismatch between fund sources and the lender has
widened. The present banking system relies on short-term deposits and saving account
deposits. A portion of these, which is basically the dormant portion, is used for lending
operations. Many banks have developed, or are in the process of developing, their own credit
rating system. The largest bank — the State Bank of India — has developed a system which
is likely to be adopted by smaller banks, with minor modifications. The commercial banks in
India have large pools of funds available for investment. After the statutory liquidity criteria
of RBI have been met, these funds may be available for medium-term lending. While many
banks invest these funds in money markets, some large banks have started financing
energy/infrastructure projects for their effective utilization.
Risks
The poor financial condition of the State Electricity Boards (SEBs) is one of the risks facing
RE project developers. An example is the Dabhol Power Project in Maharashtra. The
Dabhol Power Company, in which the now bankrupt US company Enron was a major
shareholder, had constructed and commissioned a 740 MW diesel-powered plant and was in
the process of building a gas-fired 1,444 MW plant. The project was stalled as the
Maharashtra SEB defaulted on its payments, asserting that the price of electricity, Rs.
4.8/kWh ($0.11/kWh), charged by the Dabhol Power Company was too high.
Another important risk issue is the fuel supply, which is of special concern for biomass
projects. The experience of insiders in the Indian biomass market has shown that waste
biomass availability might be high in theory but most of that waste biomass is inappropriate
for energy generation purposes owing to its poor quality. Moreover, since agro-residue
collection is not an organized business (except in the case of rice husks, which are generated
in industry, i.e. rice mills), enforceable forward sales agreements cannot be entered into.
Different potential CDM project types face different project development risks because of the
specific characteristics of the project. Generally speaking, industrial energy efficiency
projects, as well as wind energy projects (if planned in states with efficient and transparent
PPA procedures), have a lower project development risk than projects that depend on a
reliable biomass fuel supply or those that are perceived to have a negative impact on the
environment (e.g. waste gasification projects).
39
Issues and concerns related to project preparation and foreign
participation
At present, the development of CDM projects in India is largely consultant-driven and/or
influenced by international donors’ capacity-building initiatives in support of PDD (project
design document) development. These initiatives, however, are not intended to buy carbon
emission reductions (CERs), as the funding for these initiatives is through overseas
development assistance. Thus this is an “induced” project preparation market and not
completely self-propelled.
Table 5. Project design documents funded by international donors in India
Sector
Under call for CDM
members
Donor agency
GTZ
India
Canada:
PIAD
FCO,
UK, Eco
securities
Japan:
NEDO
EU: IT
power,
ECN
IDFC:
PCF
Rado
India
CERUPT
SICLIP
(Sweden)
Renewable
energy
Wind power
Small hydro
Biomass
Cogeneration
Waste to energy
Solar
Energy efficiency
Transport
Fuel switch
Coal-bed
methane
Power sector
GTZ – German Agency for Technical Cooperation; PIAD – Pembina Institute for Appropriate Development;
FCO – Foreign and Commonwealth Office, UK; NEDO – New Energy and Industrial Technology
Development Organisation; EU – European Union; ECN – Energy Research Centre, Netherlands; IDFC –
Infrastructure Development Finance Company; PCF – Prototype Carbon Fund; CERUPT – Certified Emissions
Reduction Units Procurement Tender; SICLIP – Swedish International Climate Investment Programme
Note: Cells with grey shaded areas indicate no activity.
Although there is a vibrancy in India as regards PDD development, there are several
outstanding issues constraining the wider participation of project proponents, as highlighted
in table 6.
40
Finland
Table 6. CDM project-cycle related issues
Project steps
Project conceptualization
Host country approval
PDD preparation
Registration with the CDM
EB
Project implementation
Monitoring and verification
Key issues
The project developers are often not sure whether a project
being undertaken by them will be eligible for CDM.
Greater clarity is required in order to understand the approval
criteria of the national CDM authority. The fault lies mainly
with the approval criteria of the EB, which form the basis of
the approval criteria of the national CDM authority. Eighty
CDM projects have been approved by India’s national CDM
authority in the last 18 months, far more than in any other
country for the same period.
The data for developing the baseline case are difficult to obtain
in many cases. The available methodologies are limited, but
the EB is constantly approving new methodologies.
Demonstrating additionality can be difficult. The services of a
consultant for PDD preparation may prove expensive.
The registration process seems to be a protracted one. Only 12
CDM projects had been registered by the EB as of July 2005,
three of which were from India. Requests for reviews by the
EB have slowed the pace of approval.
Integration of CDM revenues in project financing is lacking.
Most financial institutions do not yet know how to properly
value the CER revenue stream in carbon purchase transactions.
The risk of non-delivery of CERs due to non-performance
necessitates risk management measures.
Rigorous monitoring and verification contribute to transaction
costs, which can make smaller projects financially unviable,
although rules for small-scale projects provide relief.
All the steps in the project cycle have associated costs which contribute to the aggregation of
transaction costs. In some cases, given the prevailing prices of CERs, these costs may not be
offset by the CDM revenues. This may dampen the supply of projects. The experience of the
Infrastructure Development Financial Corporation (IDFC) reveals that the transaction costs
today range between $65,000 and $250,000 in India; at a price of $5 per CER, a threshold of
4,000 CERs needs to be generated per year just to break even.
The EB should step up its pace of approval of CDM projects. According to one estimate, the
EB must approve about 1,700 projects by 2010 to meet the global demand for CDM credits
of 428 MTCO2eq (RFF, 2004).
Projects approved by the Indian CDM authority
Of the 80 projects approved by the Indian CDM authority, listed in table 7, 44 are in
renewable energy, 25 in energy efficiency, 5 each in fuel switching and industrial processes,
and 1 in municipal solid waste. These projects are then submitted to the UNFCCC’s
Executive Board for validation and registration.
41
Table 7. Projects approved by the national CDM authority
Project
State
Project
type
Shri Bajrang Waste Heat Recovery in Sponge Iron Manufacture
Chattisgarh Energy efficiency
Waste Heat based 7 MW Captive Power Plant at Siltara, Raipur, Chattisgarh of M/s Ispat Godavari Ltd. Sponge
Iron Mfgr
Chattisgarh Energy efficiency
Replacement of coal as fuel by process flue gases for electricity generation at Industrial Growth Centre, Siltara,
Raipur, Chattisgarh of M/s Chattisgarh Electricity Company Ltd
Chattisgarh Energy efficiency
Model Project for increasing the efficient use of Energy using a Coke Dry Quenching system at TISCO
Jamshedpur, by TISCO
Jharkhand
Energy efficiency
10 MW Waste heat Recovery based Captive Power Plant - Usha Martin Limited - Sponge Iron
Jharkhand
Energy efficiency
Utilization of Heat of Combustion of the Blast Furnace Gas in Reheating Furnace of Wire Rod Mill Usha Martin
Limited
Jharkhand
Energy efficiency
Reduction of GHG emissions (mainly CO2) through interventions in the supply and demand side in the electricity
distribution network in Gubbi sub-station (Gubbi Efficiency Improvement Project, Karnataka, India)
Karnataka
Energy efficiency
COREX II off gas Waste Heat Recovery, Jindal Vijaynagar Steel Ltd.
Karnataka
Energy efficiency
BOF Gas Waste Heat Recovery, Jindal Vijayanagar Steel Ltd.
Karnataka
Energy efficiency
Energy Efficiency Improvement in a Cement Plant at Jaypee Associates (Cement) Madhya Pradesh
Madhya
Pradesh
Energy efficiency
Energy Efficiency in construction in cement industries across various locations in India
Maharashtra Energy efficiency
Energy Efficiency Initiatives at Lotus Suites and Hotel Orchid, Mumbai by Kamat Hotels India Limited
Maharashtra Energy efficiency
Energy Efficiency Project – Steam System Up-gradation at the manufacturing Unit of Birla Tyres, Orissa
Orissa
Energy efficiency
TSIL - Power Plant based on waste heat recovery from sponge iron kiln
Orissa
Energy efficiency
10 MW Waste Heat Recovery based Captive Power plant by Orissa Sponge Iron Limited at their plant
Orissa
Energy efficiency
Waste Heat based 8 MW Captive Power Project at OCL India Limited Sponge Iron Works at Rajgangpur, District Orissa
Sundargarh, Orissa
Energy efficiency
Reduction of GHG emissions (mainly CO2) through technological interventions in Small & Medium Enterprises
Punjab
(SMEs) Steel forging cluster units viz. Ludhiana Handtool Association, Punjab Forging Industries Association and
Gobindgarh Forging Association
Energy efficiency
8 MW Waste heat Recovery Captive Power Project,Shree Cement Limited
Rajasthan
Energy efficiency
Waste heat recovery Power plant at JK Cement Works (Unit of JK Cement Limited)
Rajasthan
Energy efficiency
Energy Efficiency project by modification of CO2 removal system of Ammonia Plant to reduce steam consumption Uttar
at Jagdishpur, Uttar Pradesh by Indo Gulf Fertilisers Limited
Pradesh
Energy efficiency
Thermal Efficiency Improvement Initiatives in Coal Fired Boiler System at Jaya Shree Textiles-Unit, Rishra,
Prabasnagar, West Bengal of M/s, Indian Rayon Industries Ltd
West
Bengal
Energy efficiency
Boiler System’ at Jaya Shree Textiles-Unit, Rishra, Prabasnagar, West Bengal of M/s, Indian Rayon Industries Ltd West
Bengal
Energy efficiency
SRBSL - Waste Heat Recovery based Captive Power Project, Shri Rampurai Balaji Steel Limited (SRBSL)
West
Bengal
Energy efficiency
Waste Heat Recovery based Captive Power Project of JBSL, Jai Balaji Sponge Limited (JBSL)
West
Bengal
Energy efficiency
42
Project
State
Demand-side energy efficiency programme in the Humidification Towers at Jaya Shree Textiles-Unit, Rishra,
Prabasnagar, West Bengal of M/s Indian Rayon and Industries Ltd
West
Bengal
Project
type
Energy efficiency
Switching of fuel from Naphtha to Natural gas by BSES Andhra Power Limited (BAPL) at their CCGT power plant Andhra
at Samalkot, East Godavri District, A.P.
Pradesh
Fuel switching
1050 MW Natural gas based grid connected combined cycle power generation project at Akhakhol by M/s Gujarat Gujarat
Torrent Power Generation Limited
Fuel switching
Switching of fuel from Naphtha to Natural gas by Essar Power Limited at their power plant at Hazira in Surat
District, Gujarat
Gujarat
Fuel switching
18 MW Natural Gas OPG Energy Pvt
Tamil Nadu Fuel switching
25 MW Natural Gas Captive Power plant, Coromondal Electric company Ltd.
Tamil Nadu Fuel switching
HFC-23 Decomposition by Gujarat Flurochemicals Ltd., Gujarat
Gujarat
Industrial process
Optimum utilization of Clinker & Conversion Factor Improvement at Birla Corporation Limited, Chittorgarh,
Rajasthan by Birla Corporation Limited
Karnataka
Industrial process
Optimal Utilization of Clinker, Shree Cement Limited
Rajasthan
Industrial process
GHG Emission Reduction by Oxidation of HFC–23 at Refrigerant (HFC-22) manufacturing facility of SRF Ltd.”
Rajasthan
Industrial process
Methane Extraction and fuel Conservation Project, TNPL, Kagitapuram, Tamil Nadu
Tamil Nadu Industrial process
4.5 MW biomass power plant, Matrix Power Pvt. Ltd.
Andhra
Pradesh
Renewable energy
12 MW Biomass based power project at Prakasam, Andhra Pradesh by Clarion Power Corporation Limited
Andhra
Pradesh
Renewable energy
6 MW Biomass based power project at Chittoor, Andhra Pradesh by Rithwik Energy Systems Limited
Andhra
Pradesh
Renewable energy
6 MW Biomass Power Plant, Satyamaharshi Power Corporation Ltd.
Andhra
Pradesh
Renewable energy
30 TPD Biodiesel Project at Samasthan Narayanpur village, Choutuppal Mandal, Nalgonda District, Andhra
Pradesh
Andhra
Pradesh
Renewable energy
18 MW Jalaput Grid connected Hydroelectric project located at Jalaput, Visakhapatnam District, Andhra Pradesh
by Orissa Power consortium Ltd.
Andhra
Pradesh
Renewable energy
7.7 MW Rice Husk Based Power Plant at Vandana Vidhyut Limited, Bilaspur, Chattisgarh by Vandana Vidhyut
Limited
Chattisgarh Renewable energy
9 MW hydel power project at Dobi Village, Kullu District, Himachal Pradesh by Cosmos Consulting
Himachal
Pradesh
Renewable energy
5.0 MW Dehar SHP in Bithal Village, Chamba District, Himachal Pradesh’ of M/s Astha Projects (India) Ltd.
Himachal
Pradesh
Renewable energy
4.5 MW Maujhi SHP in Khanyara Village, Kangra District, Himachal Pradesh’ of M/s Dharamshala Hydro Power Himachal
Ltd.
Pradesh
Renewable energy
5 Biomass Gasifier Based Power Plants Based Power Plants totalling 2 MW for different locations in Karnataka
and Tamil Nadu by Women for Sustainable Development
Karnataka
Renewable energy
Bagepalli Biogas Programme, Karnataka, ADATS
Karnataka
Renewable energy
Malavili Power Plant Pvt Limited - power plant using cotton stalks
Karnataka
Renewable energy
20 MW biomass based power plant R.K. Powergen Pvt. Ltd.
Karnataka
Renewable energy
7.5 MW poultry litter based power plant, Raja Bhaskar Power Pvt. Ltd.
Karnataka
Renewable energy
7.5 MW power plant, Santoshimata Power Projects Ltd, biomass
Karnataka
Renewable energy
Bagasse based cogeneration facility by Shree Renuka Sugars Ltd. at their plant in Belgaum District, Karnataka
Karnataka
Renewable energy
6 MW Small Hydro Power project at Somanamaradi Village, Deodurga Taluk, Raichur district, Karnataka
Karnataka
Renewable energy
3 MW Wind power project at Chitradurga district, Karnataka by Encon Services Limited
Karnataka
Renewable energy
43
Project
State
Project
type
22 MW Bagasse Based Cogeneration Project Activity at Sri Chamundeswari Sugar Limited, Mandya, Karnataka by Karnataka
Sri Chamundeswari Sugar Limited
Renewable energy
16.8 MW Enercon Bundled Wind Power Project at Chitradurga District Wind Power
Karnataka
Renewable energy
20 MW Bagasse based Cogeneration Power Project at Bannari Amman Sugars Limited, Nanjangud, Karnataka by Karnataka
Bannari Amman Sugars Limited
Renewable energy
10.25 MW SHP at Chunchi Doddi, Kanakapura (Taluk), Bangalore Rural (District) Hydroelec
Karnataka
Renewable energy
3 MW biomass (rice husk) based Power Project by M/s Deepak Spinners Ltd. at village Pagara, Distt. Guna,
Madhya Pradesh
Madhya
Pradesh
Renewable energy
37 MW Small Hydroelectric project located at two locations on Kolab river
Orissa
Renewable energy
20 MW Hydroelectric Project located at Samal, Angul District in Orissa by Orissa Power consortium Ltd.
Orissa
Renewable energy
JCT “5 MW Small Scale Biomass Project
Punjab
Renewable energy
3.5 MW Rice Husk based Cogeneration Project at Dhandari Kalan at Ludhiana Punjab by M/s Nahar Spinning
Mills Limited
Punjab
Renewable energy
3.5 MW Rice Husk based Cogeneration Project at Sherpur Woollen Mills, Ludhiana, Punjab by M/s Oswal
Woollen Mills Ltd.
Punjab
Renewable energy
‘24 MW Biomass based project at Gujarat Ambuja Cements Limited Ropar, Punjab
Punjab
Renewable energy
7.5 MW Mustard Crop Residue based Power Project of Alwar Power Company (P) Ltd., Alwar, Rajasthan
Rajasthan
Renewable energy
Utilization of biomass fuels for Pyro- processing, Shree Cement Limited
Rajasthan
Renewable energy
7.5 MW Biomass Chambal Power Limited
Rajasthan
Renewable energy
Electricity Generation from Mustard Crop Residues- Kalpataru Power Transmission Limited
Rajasthan
Renewable energy
Raghu Rama Renewable Energy Limited (RRREL) Biomass
Tamil Nadu Renewable energy
20 MW Bagasse based Cogeneration Power Project at Bannari Amman Sugars Limited, Sathyamangalam, Tamil
Nadu by Bannari Amman Sugars Limited
Tamil Nadu Renewable energy
RSCL 22 MW Cogeneration expansion project at RSCL Unit 2 Sugar Factory, Mundiyampakkam, Villupuram
Taluk, Tamil Nadu by M/s Rajashree Sugars & Chemicals Limited
Tamil Nadu Renewable energy
Bagasse based cogeneration power projects at Haidargarh Chini Mills, Haidargarh
Uttar
Pradesh
Renewable energy
Bagasse/ Biomass based 22 MW Cogeneration project by Triveni Engineering & Industries Ltd. at their Deoband
sugar plant
Uttar
Pradesh
Renewable energy
Bagasse based Cogeneration Power Project with Export of Surplus Power at Dhampur, Uttar Pradesh by Dhampur Uttar
Sugar Mills Limited
Pradesh
Renewable energy
Bagasse based cogeneration power projects at Balrampur Chini Mills Ltd. Balrampur
Uttar
Pradesh
Renewable energy
Ajbapur Sugar Complex Cogeneration Project at Ajbapur Village, Lakhimpur Kheri District, Uttar Pradesh of M/s Uttar
DCM Shriram Consolidated Ltd.
Pradesh
Renewable energy
Himalayan Small Hydroelectric Projects in Uttaranchal India, - 6 MW Bundled SSC CDM Project
Uttaranchal Renewable energy
Chamoli Small Hydroelectric Projects in Uttaranchal India, - 6 MW Bundled SSC CDM Project
Uttaranchal Renewable energy
Municipal Solid Waste (MSW) processing cum power generation plant at Lucknow (UP) by Asia Bioenergy
Limited (ABIL)
Uttar
Pradesh
44
Solid waste
Status of Indian CDM projects at UNFCCC Executive Board
Procedure for obtaining approval
The procedure for obtaining approval for a CDM project activity is somewhat arduous and
complicated and requires strict adherence to the CDM guidelines. A project design document
(PDD) describing the project activity and other CDM requirements has first to be developed
and presented to the Executive Board of UNFCCC. The PDD prescribes the methodology
for accomplishing the reduction in GHG emission and a monitoring method. Monitoring
refers to the collection and archiving of all relevant data necessary for determining the
baseline, measuring anthropogenic emissions by sources of greenhouse gases (GHG) within
the project boundary of a CDM project activity and leakage, as applicable. The project
boundary is required to encompass all anthropogenic emissions by sources of greenhouse
gases (GHG) under the control of the project participants that are significant and reasonably
attributable to the CDM project activity. If the methodology and monitoring method are new,
the project proponents (developers) have to seek approval from the Executive Board.
As of 15 July 2005, the Executive Board had approved 23 methodologies, mainly in the areas
of renewable energy generation through biomass, gas capture in landfills, fuel switching to
more efficient fuel sources such as natural gas, and improvements in energy efficiency.
These 23 approved methodologies are as follows:
1. Incineration of HFC-23 waste streams;
2. Greenhouse gas emission reductions through landfill gas capture and flaring where the
baseline is established by a public concession contract;
3. Simplified financial analysis for landfill gas capture projects;
4. Grid-connected biomass power generation that avoids uncontrolled burning of
biomass;
5. Small grid-connected, zero-emissions renewable electricity generation;
6. GHG emission reductions from manure management systems;
7. Analysis of the least-cost fuel option for seasonally operating;
8. Industrial fuel switching from coal and petroleum fuels to natural gas without
extension of capacity and lifetime of the facility;
9. Recovery and utilization of gas from oil wells that would otherwise be flared;
10. Landfill gas capture and electricity generation projects where landfill gas capture is
not mandated by law;
11. Landfill gas recovery with electricity generation and no capture or destruction of
methane in the baseline scenario;
12. Biomethanation of municipal solid waste in India, using compliance with MSW rules;
13. Forced methane extraction from organic waste-water treatment plants for gridconnected electricity supply;
14. Natural gas-based package cogeneration;
15. Bagasse-based cogeneration connected to an electricity grid;
16. Greenhouse gas mitigation from improved animal waste management systems in
confined animal feeding operations;
17. Steam system efficiency improvements by replacing steam traps and returning;
18. Steam optimization systems;
45
19. Renewable energy project activities replacing part of the electricity production of one
single fossil-fuel-fired power plant that stands alone or supplies electricity to a grid,
excluding biomass project;
20. Baseline methodology for water-pumping efficiency improvements;
21. Baseline methodology for decomposition of N2O from existing adipic acid production
plants;
22. Avoided wastewater and on-site energy use emissions in the industrial sector; and
23. Leak reduction from natural gas pipeline compressor or gate stations.
In addition, there are four approved methodologies involving a consolidation of various other
methodologies.
Baseline scenario
After the methodology and monitoring method, the baseline scenario is the most important
element in the PDD. The baseline scenario for a CDM project activity is the scenario that
reasonably represents the anthropogenic emissions by sources of greenhouse gases (GHG)
that would occur in the absence of the proposed project activity. A baseline covers emissions
from all gases, sectors and source categories listed in Annex A of the Kyoto Protocol within
the project boundary. A baseline is deemed to reasonably represent the anthropogenic
emissions by sources that would occur in the absence of the proposed project activity if it is
derived using a baseline methodology referred to in paragraphs 37 and 38 of the CDM
modalities and procedures.
Different scenarios may be elaborated as potential evolutions of baseline scenarios, including
the continuation of a current activity and implementing the proposed project activity.
Baseline methodologies must require a narrative description of all reasonable baseline
scenarios. To elaborate the different scenarios, different elements must be taken into
consideration, including related guidance issued by the Executive Board. For instance, the
project participants must take into account, among other things, national/sectoral policies and
circumstances, ongoing technological improvements and investment barriers (see Appendix
C, paragraph b (vii) and paragraphs 45 (e), 46, 48 (b), of decision 17/CP.7).
Baseline approach
In developing the baseline scenario, the baseline approach is the basis for a baseline
methodology. The Executive Board agreed to apply to CDM project activities only the three
approaches identified in subparagraphs 48 (a) to (c) of the CDM modalities and procedures.
They are as follows:
1. Existing actual or historical emissions, as applicable;
2. Emissions from a technology that represents an economically attractive course of
action, taking into account barriers to investment; or
3. The average emissions of similar project activities undertaken in the previous five
years, in similar social, economic, environmental and technological circumstances,
whose performance is among the top 20 per cent in their category.
Establishing a baseline in a transparent and conservative manner (paragraph 45 (b) of the
CDM modalities and procedures) means that assumptions are made explicitly and choices are
substantiated. If there is uncertainty regarding values of variables and parameters, the
46
establishment of a baseline is considered conservative if the resulting projection of the
baseline does not lead to an overestimation of emission reductions attributable to a CDM
project activity (that is, in the case of doubt, values that generate a lower baseline projection
are to be used).
Additionality
Establishing that the project is additional is the determining step in obtaining approval. The
steps set out below are required for additionality.
Step 1. Identification of alternatives to the project activity consistent with current laws
and regulations
Identify realistic and credible alternative(s) available to the project participants or similar
project developers that provide outputs or services comparable with the proposed CDM
project activity. If the proposed project activity is the only alternative considered by the
project participants in compliance with all regulations with which there is general
compliance, the proposed CDM project activity is not additional.
Step 2. Investment analysis
Determine whether the proposed project activity is economically less attractive than other
alternatives without the revenue from the sale of certified emission reductions (CERs).
Determine whether to apply simple cost analysis, investment comparison analysis or
benchmark analysis. If the CDM project activity generates no economic benefits other than
CDM-related income, apply the simple cost analysis (Option I). Otherwise, use the
investment comparison analysis (Option II) or the benchmark analysis (Option III). If simple
cost analysis shows that the proposed CDM project activity is not financially attractive,
proceed to Step 4 (common practice analysis), otherwise the project is not additional. If
investment comparison analysis or benchmark analysis shows that the proposed CDM
activity is not the most financially attractive option, go to Step 3 (barrier analysis), otherwise
the project is not additional.
Step 3. Barrier analysis
Establish that there are barriers that would prevent the implementation of this type of
proposed project activity from being carried out if the project activity was not registered as a
CDM activity. Such barriers may include:
Investment barriers, other than the economic/financial barriers in Step 2 above, inter alia:
- Debt funding is not available for this type of innovative project activity.
- No access to international capital markets due to real or perceived risks associated
with domestic or foreign direct investment in the host country.
47
Technological barriers, inter alia:
- Skilled and/or properly trained labour to operate and maintain the technology is
not available and no education/training institution in the host country provides the
needed skill.
- Lack of infrastructure for technological implementation.
Barriers due to prevailing practice, inter alia:
- The project activity is the “first of its kind”: no project activity of this type is
currently operational in the host country or region.
The identified barriers are sufficient grounds for demonstration of additionality only if they
would prevent potential project proponents from carrying out the proposed project activity if
it was not expected to be registered as a CDM activity.
If the identified barriers would not prevent the implementation of at least one of the
alternatives (except the proposed project activity), go to Step 4 (common practice analysis),
otherwise the CDM project is not additional.
Step 4. Common practice analysis
Analyse other activities similar to the proposed project activity. Discuss any similar options
that are occurring. If similar activities cannot be observed or similar activities are observed,
but essential distinctions between the project activity and similar activities can reasonably be
explained, go to Step 5 (impact of CDM registration). If similar activities can be observed
and essential distinctions between the project activity and similar activities cannot reasonably
be explained, the proposed CDM project activity is not additional
Step 5. Impact of CDM registration
Explain how the approval and registration of the project activity as a CDM activity and the
attendant benefits and incentives derived from the project activity will alleviate the economic
and financial hurdles (Step 2) or other identified barriers (Step 3) and thus enable the project
activity to be undertaken.
The benefits and incentives can be of various types, such as:
• Anthropogenic greenhouse gas emission reductions;
• The financial benefit of the revenue obtained by selling CERs;
• Attracting new players who are not exposed to the same barriers, or can accept a
lower IRR (for instance, because they have access to cheaper capital);
• Attracting new players who bring the capacity to implement a new technology;
and
• Reducing the inflation/exchange rate risk affecting expected revenues and
attractiveness for investors.
If Step 5 is satisfied, the proposed CDM project activity is additional.
If Step 5 is not satisfied, the proposed CDM project activity is not additional.
48
Validation
After completing the PDD, the next step is project validation. Validation is the process of
independent evaluation of a project activity by a designated operational entity (DOE) against
the requirements of the CDM as set out in decision 17/CP.7 and its annex and relevant
decisions of the COP/MOP, on the basis of the project design document.
Registration
Upon validation by the DOE, the project proponents make a request for registration.
Registration is the formal acceptance by the Executive Board of a project activity as a CDM
project activity. Registration is the prerequisite for the verification, certification and issuance
of CERs related to project activities.
Verification
Verification is the periodic, independent review and ex-post determination by a designated
operational entity of monitored reductions in anthropogenic emissions by sources of
greenhouse gases that have occurred as a result of a registered CDM project activity during
the verification period. There is no prescribed length for the verification period. It must,
however, not be longer than the crediting period.
Certification
Certification is the written assurance by the designated operational entity that, during a
specified period, a project activity achieved the reductions in anthropogenic emissions by
sources of greenhouse gases as verified.
A certified emission reduction or CER is a unit issued pursuant to Article 12 and is equal to
one metric tonne of carbon dioxide equivalent, calculated using global warming potentials
defined by decision 2/CP.3.
Once the Executive Board has issued the CERs, the purchaser of the latter makes payments to
the CDM project proponents in accordance with the purchase agreements.
Registered CDM projects
As of 20 July 2005, 12 CDM projects had been registered by the Executive Board. Of these
12, three were from India, two from Honduras, and one each from Chile, China, Brazil, the
Republic of Korea and Bhutan. In terms of methodology, two projects were on HFC
mitigation, five were hydroelectric projects, two were on landfill gas, and one each on wind
energy, biomass to electric energy and fuel switching. The following is a description of the
three registered CDM projects from India.
49
1. GHG emission reduction by thermal oxidation of HFC-23
Project proponents and project site
Gujarat Fluorochemicals Ltd, Ranjitnagar, Gujarat
Technology licensors
Ineos Fluor Limited, United Kingdom
Project activity description
HFC-23 (chemical formula CHF3) is a greenhouse gas with a global warming potential
(GWP) of 11,700. It is a by-product formed during the manufacture of HCFC-22 (chemical
formula CHClF2), a refrigerant. Note that HCFC-22, being an ozone-depleting compound, is
banned in many developed countries by the Montreal Protocol, but its manufacture in India is
allowed up till the year 2040. Typically, about 2.9 per cent of the HCFC-22 produced is
HFC-23. This by-product, HFC-23, used to be disposed of by simply venting into the
atmosphere, where it can lead to global warming. In this project, HFC-23 is now disposed
off by burning (oxidizing) in a furnace at 1,200oC. The chemical reactions are:
CHF3 ( = HFC 23) + H2O + ½ O2
CHClF2 ( = CFC 22) + H2O + ½O2
CH4 (natural gas, methane) + 2 O2
CO2 + 3 HF
CO2 + 2 HF + HCl
CO2 + 4 H2O
In the combustion chamber some steam (H2O) and hydrocarbon fuel (shown above as CH4)
are added to provide the hydrogen to convert the fluorine and chlorine atoms to HF and HCl,
respectively. Ineos Fluor is guaranteeing a 99.999 per cent combustion of HFC-23.
CER
The carbon dioxide emission reduction is estimated on the basis of a HCFC-22 production
rate of 10,000 ton/year, a HFC-23 composition of 2.9 per cent and a GWP of 11,700. The
CER amount per year is 10,000 x 0.029 x 11,700 ≈ 3,000,000 ton.
CER purchase
Rabobank International will act as intermediary on behalf of the Government of the
Netherlands for purchase of CERs. Likewise, Sumitomo Corporation will act as
translator/facilitator for CER purchase by the Government of Japan.
2. Biomass in Rajasthan: Electricity generation from mustard crop residue
Project proponents and project site
Kalpataru Power Transmission Ltd. (KPTL), Ganganagar, Rajasthan
50
Project activity description
The project involves the implementation of a biomass-based power generation plant with an
installed capacity of 7.8 MW using direct combustion boiler technology. It is a case of
utilizing an existing technology of combusting biomass fuels in a high-pressure steam boiler
(modified Rankine cycle with regenerative feed water heating and water-cooled
condensation). The power plant will be designed for operation with multiple agricultural
biomass residues. The major part of the feedstock will comprise mustard crop residue,
together with Prosopis juli flora, cotton stalk and rice husks. The residues are available in
abundance and are currently mostly burnt in the fields. The project proposes to use less than
33 per cent of the total agricultural residue for generation, leaving enough for household fuel
consumption and other uses, while reducing the environmental effects from burning the
biomass in the fields.
The electricity generated is to be supplied primarily to the state grid with an option to deliver
the balance to third parties (large industrial customers) via that grid. The technology of
biomass-based high-steam pressure power generation itself is known and in use in India.
However, the use of mustard crop residue as a fuel for power generation is a pioneering effort
by KPTL: this project represents the first time mustard crop residue will have been used for
the generation of electricity on a commercial scale.
CER
The carbon dioxide emission reduction is estimated at 31,374 ton/year.
CER purchase
SenterNovem (a union of the formerly separate organizations of Senter and Novem) is an
agency of the Dutch Ministry of Economic Affairs. SenterNovem has a long track record of
involvement with CDM projects, including the Cerupt and Erupt projects where carbon
credits are purchased on behalf of the Dutch Government. SenterNovem has signed a contract
with Kalpataru concerning the delivery of CERs to the Netherlands.
3. 5 MW Dehar Grid-connected Small Hydroelectric Project (SHP) in Himachal
Pradesh, India
Project proponents and project site
Astha Projects (India) Ltd., Bithal Village, Himachal Pradesh
Project activity description
The main activity of the project is generation of electricity using hydro potential available in
Dehar Khad in Himachal Pradesh state and exporting the generated electricity to Himachal
Pradesh State Electricity Board (HPSEB), a state-owned power utility company. The
proposed Dehar SHP is a run-of-the-river small hydro power project implemented across
Dehar Khad, a tributary of Gaj Khad which joins river Beas on the right bank in Sihunte
Taluk of Chamba District in Himachal Pradesh state. Dehar Khad flows in the westerly
direction with a steep gradient. The project design comprises head works, a powerhouse and a
51
power evacuation system. The head works include a diversion structure and an intake
structure located near Gorgu village. The power channel, desilting tank, forebay, penstock
and powerhouse are located on the left bank of the Dehar Khad. The powerhouse and outdoor
switchyard are to be constructed near the village of Bithal.
CER
The carbon dioxide emission reduction is estimated at 16,374 ton/year.
CDM projects submitted for registration
Seven validated projects had been submitted to the Executive Board for registration as of 20
July 2005. Of these, three are on landfill gas capture (one each in Brazil, Argentina and
Bangladesh) and three are on methane capture from swine manure projects in Chile. The
seventh is from India, on electricity generation from biomass.
Clarion (12 MW) renewable sources biomass project
Project proponents and project site
Clarion Power Corporation Limited (CPCL), Tanguturu Village, Andhra Pradesh
Project activity description
The project activity is a 12 MW (gross) capacity grid-connected, biomass-based renewable
energy power plant with high-pressure steam turbine configuration. The main resources for
power generation are biomass fuels such as Prosopis juliflora, cotton stalks and rice husks.
Crop residues are collected from the farmers out of their field and brought to the project; this
generates additional revenue source for crop residues which so far are otherwise being underutilized/burnt with no commercial value. On average, the project exports around 10.92 MW
power to the Andhra Pradesh Transmission Company (APTRANSCO) grid annually, with
auxiliary power consumption of 9 per cent. The plant will be operating with an annual
average plant load factor of 80 per cent. In accordance with the Ministry of Non-conventional
Energy Sources (MNES) guidelines and with Andhra Pradesh Coal Board (APCB) consent,
coal can constitute up to 30 per cent of fuel annually. Although CPCL proposes to use coal in
case of shortage of biomass only (15 to 25 per cent only), maximum use of coal (30 per cent)
has been considered for estimation of project emissions to arrive at a conservative figure of
GHG emission reductions. CPCL will be using Indian coal and imported coal in the plant,
according to availability. To arrive at the average CO2 emission factor of coal, low-calorific
Indian and high-calorific imported coal were used for calculations. However, actual figures of
calorific values and carbon contents need to be used during the verification.
Furthermore, no transmission and distribution losses are considered while calculating GHG
emission reductions, since the project exports power to the APTRANSCO grid, which is
located at about 18 km from the site. The power plant has one condensing steam turbo
generator unit with a matching boiler of the travelling grate type capable of firing multi fuels.
All necessary auxiliary facilities of the power plant are provided. The boiler is sized to
produce a maximum of 57 tons per hour of steam. The steam turbine is a straight condensing
type machine with two bleed offs, one to the deaerator and one to the low pressure heater for
52
feed water heating. The steam conditions at the boiler heat outlet have a pressure of 64
kg/cm2 and temperature of 480± 5oC. The higher steam parameters result in higher annual
savings of fuel per annum when compared with lesser steam parameters such as 44 kg/cm2
and temperatures of 440oC.
CER
The carbon dioxide emission reduction is estimated at 26,300 ton/year.
CDM projects under request for registration or review of registration
As of 20 July 2005, there were two CDM projects under request for registration — the
Paramonga project for electricity generation from bagasse in Peru, and the Nubrashen landfill
gas capture and power generation project in Yerevan, Armenia.
There is one CDM project under review for registration — the Olavarria landfill gas capture
project in Argentina.
Indian CDM methodologies approved by UNFCCC
Table 8 shows the Indian CDM methodologies approved by the UNFCCC. Once a
methodology has been approved, the project proponents can seek validation and registration
in order to earn CER credits.
Table 8. Indian CDM methodologies approved by the UNFCCC Executive Board
Project
proponent and
location
Infrastructure
Development
Finance Corp. /
Asia BioEnergy
India Limited,
Uttar Pradesh
CER,
ton/year
Project
area
101 848
Municipal
solid
waste
Quality Tonnes
LLC, Karnataka
101 000
Orissa Sponge
Iron Limited,
Orissa
39 969
Shri Bajrang
Power and Ispat,
Ltd, Chattisgarh
92 000
Energy
efficiency/
water
pumping
Heat
recovery
from
waste gas/
steel
Heat
recovery
from
waste gas/
steel
Balrampur Chini
Mills Ltd., Uttar
Pradesh
95 250
Renewable
energy /
Bagasse
Project activity
The project involves setting up of a municipal solid waste (MSW) processing
facility, which utilizes methane generated from treatment of MSW to generate
power. About 300 tonnes per day (TPD) of MSW is proposed to be processed to
generate 5.6 MW electricity and 75 TPD of organic matter. Greenhouse gas
emissions reduction results from the capture and utilization of methane, from power
generation, and from use of organic fertilizer produced from the treatment of MSW
to replace chemical fertilizer.
The project seeks to reduce GHG emissions by explicitly reducing the amount of
energy required to deliver a unit of water to end-users in municipal water utilities.
The purpose of the project is to contribute to energy efficiency, economy and
environmental improvements in sponge iron making in a coal-based rotary kiln. The
objective is to recover and utilize the sensible heat contained in the waste gases
generated from the direct reduction iron kiln for generation of 6 MW of electrical
energy.
The project activity takes place at a sponge iron plant and involves the generation of
18 MW of electrical power through the installation of waste heat recovery boilers
and turbine generators. The waste heat produced during the manufacture of sponge
iron will be passed through boilers using electrostatic precipitators and the resultant
steam will be utilized to generate electrical power. The electrostatic precipitator is a
much more effective means of collecting particles from waste gases and therefore
the benefits of installing waste heat recovery will be reflected not just in the
displacement of fossil-fuel-based power generation but also in the reduced particle
matter being released into the atmosphere. The technology employed in the
generation of electrical power will be two 38 tonne per hour 62 bar boilers
manufactured by Thermax India and one 8MW and one 10MW condensing turbine
generator manufactured by Triveni India.
The purpose of the project activity is to utilize the bagasse wastes of the Balrampur
Chini Mills Limited’s (BCML) Haidergarh sugar mill in Uttar Pradesh, India, to
generate 20 MW of electricity for internal use and sale of the surplus electricity to
53
Project
proponent and
location
CER,
ton/year
Indo-Gulf
Fertilisers Ltd.,
Uttar Pradesh
24 526
Shree Renuka
Sugars Agrinergy
Ltd., Karnataka
22 000
Thiru Arooran
Sugars Ltd. and
Prototype Carbon
Fund Karnataka
584 000
Project
area
Energy
efficiency/
CO2
removal in
ammonia
plant
Renewal
energy/
bagasse
Renewal
energy/
bagasse,
biomass
Project activity
the state power grid. By displacing imported carbon-intensive grid energy with a
renewable, zero-carbon energy source, the BCML Haidergarh Bagasse
Cogeneration Project reduces carbon dioxide emissions over the project life. A
feature of the project is the use of high efficiency boilers for optimizing the energy
produced per unit of bagasse burnt.
Energy efficiency project by modification of CO2 removal system of ammonia plant
to reduce steam consumption
The project is an expansion of a bagasse cogeneration unit located at Shree Renuka
Sugars (SRS) factory. The project involves the addition of a new boiler and turbine
generator unit (TG3). The boiler has a capacity of 50 tph, an operating temperature
of 500oC and pressure of 45 kg/cm2. The turbine generator is a 9.3 MW, back
pressure type turbine, producing power at 11kV with an exhaust pressure of
1.5kg/cm2 and a 7 kg/cm2 bleed.
The project involves increasing the electricity-generating capacity at the sugar mills
by replacing low-efficiency boilers by high- efficiency boilers, and installing
additional turbines. Also, the fossil fuel (coal) used during the off-season will be
replaced by locally produced agro-biomass such as wood chips and sugarcane trash.
Indian CDM methodologies under consideration by UNFCCC
Table 9 shows the Indian CDM methodologies that are under consideration.
Table 9. Indian CDM methodologies under consideration by the UNFCCC Executive
Board
Project
proponent and
location
Hindusthan
Construction Co.
– various states in
India
CER,
ton/year
Project area
Project activity
99 785
Reduction in
cement
composition
of concrete
Associated
Cement
Companies,
Karnataka
136 368
Replacement
of clinker by
fly ash in
cement
Birla Cement
Companies,
Rajasthan
23 904
Replacement
of clinker by
fly ash in
cement
Southern
Biotechnologies,
Andhra Pradesh
24 000
Biodiesel
production
and fuel
switching
from
petroleum to
biodiesel
Alexandria
Carbon Black Co.
147 391
Waste gas
for power
The project activity proposes to reduce quantum of Ordinary Portland Cement
(OPC) used during concrete mix production in different construction applications of
the Hindustan Construction Company Limited (HCC). It promotes, establishes and
implements a new technology called the lower cement concrete technology (LCCT),
which involves (1) use of high-range water -reducing admixtures to decrease the
OPC content in concrete mix, and (if permitted by client), (2) further decrease the
OPC content in the concrete mix obtained under (1) through partial replacement
with alternate cementitious materials such as fly ash.
The project activity consists of an increase in the percentage of fly ash blended in
the Portland Pozzolonic Cement (PPC) produced by the New Wadi cement plant. A
key impact of the project activity is environmental – limestone is a finite resource,
and the (open cast) mining of limestone can have adverse environmental effects. Fly
ash is a by-product of electricity generation, and is a product for which disposal can
be difficult. Replacing limestone-derived clinker with fly ash therefore provides two
benefits. Moreover, clinker production is highly energy-intensive. Reducing clinker
production will therefore conserve energy and, given the power shortages that are
prevalent in many parts of India, will assist India’s overall development process.
Finally, the project will reduce emissions of greenhouse gases.
The project entails a reduction in the clinker content of Portland Pozzolanic Cement
by increasing the fly ash additive, thereby replacing an equivalent amount of
clinker. Clinker manufacturing, which includes pre-processing (grinding) and pyroprocessing of the raw meal, is a highly energy-intensive process. This reduction of
the percentage of clinker in the cement would conserve natural resources such as
limestone and coal fuel used to meet the thermal and electrical energy requirements
of pre-processing and pyro-processing of cement manufacture.
The purpose of the project activity is to manufacture biodiesel (30 ton per day) from
edible/ non-edible oils derived from tree-borne oil- bearing seeds, fatty acids,
animal fats etc. for substituting petro-diesel or using as a blend in petro-diesel. The
proposed project promotes mitigation of greenhouse gas emissions by partially or
fully substituting the petro-diesel in transportation vehicles and to a small extent in
stationary applications such as water pumps, power generation sets, industrial
thermal applications etc. Biodiesel is a renewable energy source and contributes to
the sustainable development of the region.
The proposed project activity involves addition of a new boiler and turbine
generating unit based on the utilization of additional waste gas being generated by
54
Project
proponent and
location
(ACB), a joint
venture between
Aditya Birla
group of India and
the Egyptian
Govt., Alexandria
Egypt
Torrent Power
Generation
Limited, Gujarat
CER,
ton/year
Project area
Project activity
and steam
cogeneration
new production line #4 at the carbon black production facility. The boiler has a 65
ton per hour capacity, operating at 405oC and a pressure of 42 Kg/cm2. The turbine
generator has a capacity of 12.65 MW. The CDM project activity will meet the
steam and power requirements of the Alexandria Fibre Co. operating in the
adjoining area.
Natural gas
for gridconnected
power
supply using
combined
cycle
Torrent Power Generation Limited (hereafter TPGL) proposes to set up a power
generation unit of 1,050 +10 per cent MW capacity using natural gas as fuel and
based on combined cycle technology. As required under mega power policy by the
Government of India, TPGL is free to supply the power to be generated from the
project activity to any entity in India subject to certain quantum (which is yet to be
specified) being supplied on an inter-state basis. Currently, TPGL proposes to
supply 75 per cent of the power generated to the Surat Electricity Company Limited
(SEC) and the Ahmedabad Electricity Company Limited (AEC), which are also
equity partners in TPGL, under a long-term power purchase agreement (subject to
approval by the Regulatory Commission).
Under this project various promoters are establishing 9 biomass gasification-based
power plants totalling 2.25 MW, with capacities ranging from 100 to 1,000 kW, at
different locations in the states of Karnataka and Tamil Nadu. The project involves
using woody biomass as fuel in open top gasifiers, which generate producer gas.
This gas is then cleaned, cooled and used for power generation, thus replacing
conventional fossil fuel which would otherwise have been used for power
generation.
The project activity is generation of 10.25 MW of electrical power using hydro
potential available in river Arkavathi near Chuchi Doddi village in Karnatatka and
exporting the generated electricity to the state-owned power utility company. The
proposed project is a run-of-the-river hydroelectric scheme that comprises a
diversion structure, power canal, penstocks, powerhouse, power evacuation system
and tailrace canal. No storage facility such as a dam is envisaged in the project
design..
The project activity is generation of 9 MW of electrical power using hydro potential
available in the river Shishila near Parpikala village in Karnatatka and exporting the
generated electricity to the state-owned power utility company. This is a run -ofthe- river project without involving long-term storage of water and will only utilize
water flowing in the stream at any given time.
Rithwik Energy Systems Limited (RESL) has set up the 6 MW biomass-based
power plant at Rachagunneri village, Srikalahasthi mandal, Chittoor district, Andhra
Pradesh, India. The primary fuels for the power plant are rice husk, bagasse,
groundnut shell, Juliflora, Sugarcane tops, etc. Various combinations have been
considered as fuels and the fuel requirement varies with the combination. RESL
utilizes the availability of fuel from the nearby villages, rice mills and sugar plants
DESI Power,
Netpro, Women
for Sustainable
Development,
Karnataka and
Tamil Nadu
Renewable
energy/
biomass,
gasification
Sai Spurthi Power
Limited,
Karnataka
Renewable
energy/ gridconnected
hydroelectric
Parpikala Power
Limited,
Karnataka
Renewable
energy/ gridconnected
hydroelectric
Rithwik Energy
Systems Limited
(RESL), Andhra
Pradesh
Renewable
energy/ gridconnected
biomass
Hassan Biomass
Power Company
Private Limited,
Karnataka
Renewable
energy/ gridconnected
biomass
Hassan Biomass Power Company Private Limited (HBPCPL) is currently
implementing an 8 MW biomass-based power plant, in Karnataka, India. The
purpose of the project is to effectively use available, sustainably grown and unutilized waste biomass resources for the generation of electricity. The power
generated will be exported to the Karnataka state grid through Karnataka State
Power Transmission Corporation Limited by means of an already contracted
purchase agreement.
55
Indian CDM methodologies rejected by UNFCCC
Table 10 shows the rejected Indian CDM methodologies.
reapply after addressing the concerns raised by the EB.
The project proponents may
Table 10. CDM methodologies rejected by the UNFCCC Executive Board
Project
proponent and
location
Jaypee Associates,
Madhya Pradesh
CER,
ton/year
Project
area
108 447
Energy
efficiency/
cement
Essar Power
Limited, Gujarat
413 706
Fuel
switching
Aban Power
Company, Tamil
Nadu
231 673
Fuel
switching/
IGCC
Project is a grid-connected natural-gas-based
combined cycle power plant. With an installed
capacity of 119.8 MW, it has one gas turbine
generating unit of 70 MW rated capacity, one
heat recovery steam generator and one steam
turbine generating unit of around 49.8 MW
rated capacity, along with all electrical
systems, controls and instrumentation, and
civil, structural and architectural works.
Coromandel
Elelctric
Compamy
Limited, Tamil
Nadu
62 682
Fuel
switching
Coromandel Elelctric Compamy Limited
(CECL) is setting up a 25 MW, natural-gasbased power plant. The company has a natural
gas allocation from Gas Authority India Ltd.
to the tune of 120,000 SCM/day. The project
will use gas engine technology to generate
power. The entire power from the project will
be consumed by the cement plants of India
Cements Ltd.
Chennai
Petroleum
Corporation Ltd,
Tamil Nadu
101 000
Refinery
residue/
IGCC
This project involves the use of high sulphur
petroleum refinery residue for power
generation (492 MW) using the integrated
gasification combined cycle (IGCC)
technology.
Project activity
Reasons for non-approval
The project proposes to improve thermal and
electric energy efficiency. Key process
changes being implemented are the following:
increasing the number of pre-heaters from 4 to
6, thus increasing recovery of thermal energy;
improving kiln burner insulation and operating
speeds, which will increase output and reduce
thermal energy consumption; improving the
technology of cooling of clinker to improve
thermal energy consumption; use of high efficiency classifiers in various grinding
operations; and use of mechanical conveying
(bucket elevators) in place of pneumatic
conveying.
The principal aim of the project is to effect a
change in primary fuel from naphtha to natural
gas. The power plant (capacity 515 MW) has
been using naphtha as the primary fuel and
effected a shift to natural gas from midDecember 2002 at an additional investment of
Rs 31.4 million, with a view to effecting a
decrease in GHG emissions and minimizing
other environmental impacts.
The required changes in the baseline
methodology would necessitate
significant changes to the proposed
monitoring methodology — for
example, to monitor outputs of
products and other parameters, and to
assess whether product mix has
changed substantially and whether it
has a substantial impact on energy
consumption.
56
The methodology is not transparent
and not conservative. It has a number
of gaps and is not a stand-alone
methodology to provide adequate
information for review. Major reasons
for non-approval include the
following; 1. weak baseline analysis;
2. inadequate additionality analysis;
3. faulty Leakage analysis;
4. incorrect project emissions;
5. unjustified emission reduction
formulae/algorithms.
Additionality concerns: The proposed
additionality analysis is insufficiently
developed, and most statements are
general. The arrangement of tests is
vague and overlapping, and it is not
clear how the different tests relate to
each other. In the evaluation of likely
non-project options it is not clear
which technologies will be
incorporated in a dynamic market.
Baseline concerns: The analysis
suggested to evaluate the emissions in
the case of captive power should
consider lifetime and capacity of the
old installation.
In general, the methodology is not
stand-alone, applicability conditions
are not relevant, and practically all the
sections in PDD are to be re-drafted
or significantly improved. Although
the methodology stipulates a broader
applicability to fuels, it seems that its
applicability is rather limited to
natural gas/proposed project activity
described in the draft CDM-PDD.
The methodology should be standalone and not refer to specific
projects.
Feasibility study only
Project
proponent and
location
Suzlon (India),
Tamil Nadu
Jindal
Vijayanagar Steel
Limited,
Karnataka
CER,
ton/year
Project
area
37 000
Renewable
energy/
wind
57 600
Energy
recovery
from
waste gas/
steel
Paperboard and
Specialty Papers
Division
Energy
efficiency/
increased
use of
biomass in
pulp and
paper
industry
SCM Sugar,
Karnataka – 26
MW Bagasse
Cogeneration
Renewable
energy/
bagasse
Project activity
Reasons for non-approval
The project involves the implementation of 15
wind turbines of 1 MW each with a total
capacity of 15 MW. The size of the turbines (1
MW each) is much larger than the average size
of wind turbines in India (250-300 kW). The
electricity is sold to the Tamil Nadu Electricity
Board (State grid).
During the operation of the Basic Oxygen
Furnace (BOF) converter, waste gases (called
BOF gases) are generated. Such gas has a
combustible proportion in the form of carbon
monoxide (CO), which makes this a health
hazard and cannot be emitted to the
atmosphere. Hence, the BOF gas is currently
being flared, in a business as usual scenario.
The BOF gas also has a latent heat potential
due to the presence of CO, which may be
extracted and utilized by combustion to
generate thermal power in the form of
electricity. Such efforts need collection,
stabilization (to ensure continuous and steady
flow at required pressure) and delivery of the
BOF gas from the BOF plant to the thermal
power plant. JVSL has a sister concern called
the Jindal Thermal Power Company Limited
(JTPCL)3, and few other thermal power plants
are also proposed for the near future, it being
proposed that the BOF gases be delivered
through a gas grid to be established.
Project proposal withdrawn
The Paperboard and Specialty Papers Division
unit has installed a two-stage oxygen
deligninfication (ODL) process, an efficient
free flow falling film (FFFF) evaporator and an
efficient soda recovery boiler (SRB) that has
increased biomass-based energy in the plant
and at the same time reduced organic load at
the effluent treatment plant. The FFFF
evaporator has reduced the steam required for
evaporating black liquor solids over the rising
film evaporator while the new and efficient
soda recovery boilers generate more steam for
the same quantity of black liquor fired at the
boiler. This CDM project initiative increases
biomass generation as well as improving its
processing and utilization through the ODLFFFF-SRB route, thus obviating the need for
fossil-fuel-generated steam energy.
The purpose of the project essentially is to
utilize available mill generated bagasse
efficiently for generation of steam and
electricity required for sugar manufacturing
and export surplus power to the state electricity
grid and generate additional revenue. The
project will meet the captive steam and power
requirement of the sugar unit and cogeneration
plant auxiliaries, and the power requirement of
the colony. The balance power will be sold to
the state grid for additional revenue generation.
In addition, this project activity will lead to
sustainable economic growth, conservation of
the environment through use of biomass fuel
and GHG emission reduction.
The methodology has not been
described in an adequate and concise
manner. Formulae and algorithms: the
methodology has an unclear set of
equations for emission reduction
calculation that are erroneous and not
easy to follow. No methodology is
provided to select baseline or to
demonstrate that continuation of
current practice is the baseline. The
methodology seems to be tailored to
the proposed project activity only and
difficult to apply to other projects.
57
A proper justification for the use of
weighted average of “worst
performing” power plants for
calculating the operating margin
(OM) for the grid has not been
provided. Not necessarily the "worst
performing plants", defined by project
participants as low performance ratio
plants that contributed about 10 per
cent of the total power generated in
the grid in the operating year, are the
ones replaced by the new electricity
to the grid. There may be electrical, or
other, reasons to keep them running.
Also, it is said that “OM emission
factor will be dynamic, i.e., can
change annually for every crediting
year”. How will that occur if the
project itself will now be providing
electricity to the grid and, as such,
replacing some electricity that,
otherwise, would be part of the
baseline? The required changes in the
baseline methodology would
necessitate significant changes to the
proposed monitoring methodology.
No methodology regarding whether
the project activity is not the baseline
scenario; the simple statements that
the technology is less carbon intensive (statements a, b, c, d page
13, of section B.4 of draft CDMPDD) and that the technology is new
(statements f, g and h) and more
costly (statement e) do not
demonstrate additionality, since it is
also stated that the technology is more
efficient and will generate additional
revenues when compared with the
baseline, and no methodology is
proposed to demonstrate that these
additional revenues are not sufficient
to ensure investment.
Conclusions
The total annual global carbon demand is quite robust, estimated at between 415 and 1,250
MTCO2eq (million tons CO2 equivalent). Even though the potential CDM market has become
smaller than originally envisioned owing to the rejection of the Kyoto Protocol by the United
States, and the significant amount of "hot air" (the excess of the 1990 emission level over the
current level) in the Russian Federation, Ukraine and Kazakhstan, the global CDM market is
expected to be between 38 and 264 MTCO2eq per year. On the basis of data on trade of
carbon dioxide emission reductions (CER), India is expected to capture between 20 and 30
per cent of the CDM market. Thus its volume of CER exports in 2010 may range between 7.5
MTCO2eq and 78 MTCO2eq. At a price of $4/ton CER, this will bring in revenue from $30
million to 300 million per year. Other major exporters of CERs are Brazil and Chile. The
major buyers of CERs are Japan (21 per cent), the Netherlands (16 per cent), the United
Kingdom (12 per cent) and other EU countries (32 per cent). The distribution of CDM
projects worldwide by sector is as follows: HFC abatement (25 per cent), animal waste (18
per cent), hydroelectric (12 per cent), electricity generation from biomass (11 per cent),
landfill gas capture (10 per cent), wind (7 per cent) and others (17 per cent).
India’s pre-eminent position in the CDM market is due to many favourable enabling factors
such as a good technical base, and a proactive National CDM Authority approving projects
for submission to the UNFCCC Executive Board in a time-bound manner and ensuring the
contribution of CDM activities to sustainable development priorities in India. Eighty CDM
projects have been approved by India’s National CDM Authority in the last 18 months, far
more than in any other country for the same period. The Ministry of Environment and
Forests is the nodal ministry for CDM issues in India. It has established the National CDM
Authority, which also includes secretaries from other important ministries such as foreign
affairs, finance, non-conventional energy sources, and power.
Data for 1994 from the National Communication, the latest official source of GHG
emissions, indicate that 743.8 MTCO2eq of GHGs were emitted from energy sector (61 per
cent); 344.5 MTCO2eq emissions came from the agriculture sector (28 per cent); 102.7
MTCO2eq were contributed by industrial processes (8 per cent); 23.2 MTCO2eq were from
waste disposal (2 per cent) activities and 14.3 MTCO2eq were generated from land use, landuse change and the forestry sector (1 per cent). Most of the GHG emissions in the energy
sector are from the coal-fired plants in the electric power industry. India’s installed power
generation capacity is 115,545 MW, and the electric energy–GDP elasticity is 1.5, which
means that for a GDP growth rate of 7 per cent, the required growth rate of electric energy is
10 per cent. Thus an additional power capacity of 100,000 MW is planned for installation in
the period 2002–2012. To improve power generation efficiency while cutting down on CO2
emissions, the State Electricity Boards are embarking on renovation and modernization
(R&M) and life extension (LE) programmes. These measures include installing more
efficient boilers, furnaces, pumps, turbines and generators, improving maintenance
procedures, and implementing coal beneficiation processes such as coal washing for optimal
utilization of coal.
The greatest potential for CDM lies in the areas of renewable energy (RE), enhanced
industrial efficiency and industrial processes, fuel switching, and municipal solid waste
(MSW). The Government of India is making a concerted effort to promote renewal energy
technology. Fifty-five per cent of the 80 projects approved by the Indian CDM Authority are
in the RE sector. India is the only country in the world that has a dedicated ministry for
59
promoting renewable energy, the Ministry for Non-conventional Energy Sources (MNES),
and an exclusive public sector financial sector, the Indian Renewable Energy Development
Agency (IREDA). MNES prepared in 1993 and 1996 a set of guidelines for “Promotional
and Fiscal Incentives by State Governments for Power Generation from Non-Conventional
Energy Sources". These guidelines were designed to bring about a level playing field for
power generation from renewable energy sources. Salient features included a preferential
tariff of 4.5 ct /kWh from 1993 with a 5 per cent annual escalation, allowing third-party sale
and captive use, ensuring timely payment of purchased electricity, long-term purchasing
power agreements (PPA), providing grid connectivity, creating the infrastructure for power
utilization, streamlining the procedures for various statutory clearances, and exemptions from
certain sales tax and electricity duty. In addition, concessional customs duties for imported
RE equipments were granted to RE providers, and arrangements were made for soft loans and
a long-term debt facility.
Of the 44 CDM projects on renewable energy that have received host-country approval:
• Eighteen projects are based on biomass, excluding bagasse. The biomass used as
fuel for generating power includes rice husk and cotton stalks. The 7.8 MW
biomass project in Rajasthan using mustard crop residue has been accorded
registration by the EB. In addition, the 12 MW biomass project by Clarion Power
Corporation in Andhra Pradesh has been validated by the EB and is in the process
of being registered.
• Ten projects are based on cogeneration from bagasse. India is the second largest
sugar producer (just slightly behind Brazil); sugarcane output is 320 million tons,
resulting in about 270 tons of bagasse annually.
• Ten projects are small hydroelectric plants (4 to 20 MW). All these projects are
run-of-the-river projects, none of which involve construction of dams. The EB
has accorded registration to the 5 MW Grid-connected Dehar Hydroelectric
Project in Himachal Pradesh.
• Two projects are on wind power.
• The biogas, biodiesel, manure and gasification areas have one project each.
There are 25 projects on improved industrial efficiency, which include:
• Twelve projects on recovering waste heat for electricity generation in the iron and
steel industry;
• Four projects on waste energy recovery in the cement industry;
• One project each in the ammonia and pulp and paper industries; and
• Seven other projects on energy efficiency, including one on installing more
efficient pumps and metering devices in a municipal water delivery system.
There are five projects on switching to fuels with a lower carbon-to-hydrogen ratio, such as
from coal to oil or natural gas, and from oil to natural gas. These projects include the 1,050
MW natural-gas-based grid-connected combined cycle power generation project at Akhakhol
by M/s Gujarat Torrent Power Generation Limited, and the 535 MW project by Essar Power
Limited at its power plant at Hazira in Surat District, Gujarat. Natural gas has the lowest CO2
emissions per unit of energy of all fossil fuels, at about 15 kg C/GJ, compared with oil with
about 20 kg C/GJ and coal with about 25 kg C/GJ (all based on low heating values). The
lower-carbon-containing fuels can, in general, be converted with greater efficiency than coal.
For instance, the efficiencies of a coal-fired plant and natural gas fired plant are 30 per cent
60
and 45 per cent, respectively. Thus, the reduction in CO2 emission when switching from coal
to natural gas is 50 per cent per kWh of electricity generated.
The five projects on improved industrial processes include two on thermal destruction of
HFC-23. One of these, developed by Gujarat Fluorochemicals, has been granted registration
by the EB, and has a CER of 3 million ton per year, the highest so far of any Indian CDM
project. This is mainly due to the fact that HFC-23 has a global warming potential of 11,700,
far more than any other gas in the UNFCCC’s basket of GHG gases. Another project on
improved industrial processes involves replacement of clinker in cement by non-cementitious
material such as fly ash.
Asia Bioenergy India Ltd. (ABIL) is developing a 5.1 MW power plant at the MSW
treatment site in Lucknow. The solid waste is separated and the organic degradable matter is
anaerobically digested to produce methane, which serves as the fuel for the power plant. In
addition, from 300 tons per day of MSW, 75 tons of organic manure is obtained as a byproduct.
All CDM project-based transactions in India follow a commodity model, whereby the buyer
of carbon purchases the certified emission reductions generated by the project as it would
purchase any other commodity or service. Thus, for the HFC-23 oxidation project of Gujarat
Fluorochemicals with a CER of 3 million ton/year, Rabobank International will act as
intermediary on behalf of the Government of Netherlands for purchase of CERs. Likewise,
Sumitomo Corporation will act as translator/facilitator for CER purchase by the Government
of Japan. For the 7.8 MW mustard crop residue project developed by Kalpataru Power
Transmission Ltd. (KPTL), Rajasthan, SenterNovem, an agency of the Dutch Ministry of
Economic Affairs, has signed a contract with Kalpataru concerning the delivery of CERs to
the Netherlands.
At present, the development of CDM projects in India is largely consultant-driven and/or
influenced by international donors’ capacity-building initiatives in support of PDD (project
design document) development. The following international organizations have assisted in
PDD development: GTZ – German Agency for Technical Cooperation; PIAD – Pembina
Institute for Appropriate Development, Canada; FCO – Foreign and Commonwealth Office,
United Kingdom; NEDO – New Energy and Industrial Technology Development
Organisation; ECN – Energy Research Centre, Netherlands; IDFC – Infrastructure
Development Finance Company; PCF – Prototype Carbon Fund; CERUPT – Certified
Emissions Reduction Units Procurement Tender; SICLIP – Swedish International Climate
Investment Programme
Conventionally, the CDM projects in India eligible for CDM investments have made use of
standard financial instruments offered by banks/financial institutions. The development
banking system, which financed long-term projects with long-term financial instruments, has
almost been dismantled, as the funding sources for them have become more short-term. The
Indian Renewable Energy Development Agency offers attractive financing schemes for
renewable energy projects such as loans of up to 85 per cent of the project cost and up to 75
per cent of the equipment cost; a 5 to 14 per cent rate of interest; a moratorium of up to three
years in loan repayment; and a repayment period of up to ten years. For biomass projects
(except bagasse), the maximum loan amount is 70 per cent of the project cost.
61
Different potential CDM project types face different project development risks owing to the
specific characteristics of the project. Generally speaking, industrial energy efficiency
projects as well as wind energy projects (if planned in states with efficient and transparent
PPA procedures) face relatively low project development risks compared with projects that
depend on a reliable biomass fuel supply or projects that are perceived to have a negative
impact on the environment (e.g. waste gasification projects).
There are several hurdles in preparing the PDD. The data for developing the baseline case are
often difficult to obtain. The available methodologies are limited, but the EB is constantly
approving new methodologies, thus demonstrating that additionality can be difficult. For
instance, the special tariffs or the purchasing power agreements, which the Government has
established for renewable energy projects, may make the projects non-additional and thus
ineligible for CDM status and revenue. Also, with crude oil prices climbing to over
$64/barrel, the cost of biodiesel and bioethanol production might easily fall below that of
petroleum diesel and petrol, and this would make the biodiesel and bioethanol projects nonadditional. The services of a consultant for PDD preparation may prove expensive. The
transaction cost of a CDM project has been estimated at between $65,000 and $250,000; thus,
the project has to generate 2,000 CERs just to break even.
The slow pace of approval of CDM projects (only 12 have been registered so far, including
three from India), and the numerous calls for review have proved frustrating. According to
one estimate, the EB must approve about 1,700 projects by 2010 to meet the global demand
for CDM credits of 428 MTCO2eq.
In conclusion, high-quality CDM projects must be developed within the next two years (2005
and 2006) for India to capitalize on its CDM potential during the first commitment period,
2008–2012. Implementation of the CDM in India can deliver significant local, economic and
sustainable development co-benefits. However, the projects most in demand such as HFC-23
removal offer the greatest CER but yield lower sustainable co-benefits. India’s CDM
strategy, policy, and implementation plans should include guidance on unresolved issues such
as the sharing of CER revenue between project proponents and utilities. Finally, cooperation
with potential investors and stakeholders from the public and private sectors should be
encouraged to establish facilities for risk management and project financing. This could take
the form of a national CDM fund that supports the development of good-quality and relevant
CDM projects.
62
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